23 October 2012 06:28 [Source: ICIS news]
By Prema Viswanathan
SINGAPORE (ICIS)-Prices of polyethylene terephthalate (PET) in the Middle East are set to decline in the next few months, as demand turns bearish with the onset of winter, suppliers and buyers said on Tuesday.
“Buying has been very sluggish in October, as end users expect prices to fall in November when the lean demand season sets in,” said a Dubai-based trader.
“The price increases in September have been because of the feedstock push and not on account of market sentiment, which has been quite downbeat.”
PET prices in the Gulf Corporation Council (GCC) region declined by $10/tonne (€7.70/tonne) at the higher end of the range during the week ended 18 October, to $1450-1,490/tonne CFR (cost and freight) GCC, ICIS pricing data showed.
Prices had climbed steadily from May to early October on the back of rising costs of feedstocks purified terephthalic acid (PTA) and monoethylene glycol (MEG) as well as relatively strong demand for PET bottles from the beverage segment during the hot summer months.
Prices of feedstocks PTA and MEG softened by $10-15/tonne and $7-10/tonne respectively week on week on 18 October.
But the decline in feedstock costs was perceived by PET suppliers to be a market correction, as prices of PTA and MEG had risen very sharply the previous week, by $45/tonne and $40-42/tonne respectively.
Trading has also been muted ahead of the Muslim festival of Eid-ul-Adha holidays which begins on 26 October.
End users were reluctant to stock up in anticipation of a possible reduction in regional offers next week.
End-users in the GCC are currently maintaining only one month’s worth of inventory, a 50% reduction from their inventory levels earlier in the year, suppliers and buyers said.
Uncertainty over future price trends was a key factor behind the decline in inventories, a trader said.
Separately, a Dubai-based trader said import offers had declined because of excess availability of cargoes in the GCC, following the expansion of Octal’s PET plant at Salalah, Oman.
An end-user based in the UAE said he was adopting a wait and watch stance, as he had two months worth of inventory, which he had accumulated when prices were much lower.
Export offers from the GCC were stable as regional suppliers continued to export to more lucrative destinations such as Europe and the US in a bid to maintain their margins.
One supplier said its export offers were at $1,500-1,510tonne FOB GCC into Europe, unchanged from the previous week.
But the export outlook for November and December was bearish, as GCC suppliers would need to liquidate their stocks before the end of the accounting year, buyers said.
Even those producers who were aggressively exporting would have to cut back in December, when demand in most markets typically declines, they said.
However, a Saudi-Arabia based end user said that demand from the soft drinks segment in Europe and the US would improve by the end of December because of the Christmas and New Year celebrations.
($1 = €0.77)
Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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