December PET prices bottom out in Europe on higher feedstocks

21 December 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--The value of polyethylene terephthalate (PET) in Europe reached a floor in December, partly due to expectations of more expensive production costs in January spurring customers on to cover themselves beforehand, sources said on Friday.

"PET guys are expecting prices to go up in January, so [sellers] have stopped offering," a reseller said.

Customers experienced rollovers and increases of €5-25/tonne ($7-33/tonne) from November to December, depending on account and location, with most accounts settling December at €1,250-1,300/tonne FD (free delivered) Europe. 

Customers's options to acquire cheap PET for December and January delivery from importers or local suppliers are becoming slimmer as the year draws to a close. A major producer is vying to push prices over €1,300/tonne in January.

"It seems producers want to touch €1,300/tonne as a minimum again. There is a good chance that this will come," a second reseller said.

The notion that some sources have of there being higher demand and restocking in January is quashed by those customers who have pre-bought and who therefore, will have less need to buy in the New Year.

"Nearly all producers are sold out, because there has been a lot of demand and maybe prebuying… In January there may be less demand, who knows," a producer said.

The action of buying ahead of potential price increases has helped to reduce availability in what was a market peppered with some hasty sales at low prices.

Some customers managed to acquire product below what was considered to be the norm of around €1,250/tonne in November. These buyers have experienced greater increases in December than the majority of customers who were already paying above €1,250/tonne in November.

A single instance of a €30/tonne decrease from the high €1,200s/tonne was recorded this week from November to December.

"I bought a bit in advance in November and in December the spot price is going up by €25/tonne around," according to a customer.

Overall, the freely negotiated price range for PET remains relatively stable between €1,250-1,300/tonne, bar an increase for spot prices from the bottom of the spread.

These prices are well below those contracted on a raw material formula and buyers acknowledge the need for producers to improve margins where possible.

There have been reports of customers planning to reduce contracted volumes in 2013. Customers have also been trying to negotiate producers down significantly on the fee over conversion costs for 2013, although some managed to renegotiate down their 2012 fees over the course of this year, according to sources.

($1 = €0.76)

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By: Caroline Murray
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