08 March 2013 09:18 [Source: ICB]
The European polyethylene terephthalate (PET) market is waiting for March contract news from the upstream paraxylene (PX) and monoethylene glycol (MEG) industry, in what is a turbulent time for exchange rates, sources said on 28 February.
The market is suffering from "pure knee jerk reactions," when it comes to the euro/US dollar exchange rate volatility, according to a PET producer.
The PX contract price in dominant Asia was settling down $15/tonne (€11/tonne) from February to $1,670/tonne CFR (cost and freight) Asia in March. This is the first decrease of the year, yet the weak euro could still result in an increase for PX in euro terms.
"There is no opportunity to relax," the producer added. February MEG contracts were yet to be fully agreed at the initial €1,105/tonne FD (free delivered) NWE (northwest Europe). The price includes compensation for sellers, and now buyers say it is their turn to get compensation in March.
"We are looking towards a substantial decrease in March [the] MEG European contract price, to reflect the Asian decrease suitably," a contract buyer of MEG said.
ASIA SPOT MEG PLUMMETS
Asian spot MEG prices collapsed by 6-8% in two days last week. A second MEG buyer said it was expecting a €15-20/tonne fall on MEG contracts to March, adding that without the ethylene increase, MEG should have dropped by €30-40/tonne. A €50/tonne rise in the cost of feedstock ethylene is one argument European MEG producers are using to support the idea of a higher price in March.
"I see an increase based on increased costs, Asian prices more or less similar to Jan level if you take Feb average and slightly increasing spot values in Europe," an MEG producer said, adding that availability of MEG and upstream ethylene oxide (EO) was tightening and spot MEG had rebounded.
The PET industry has been dogged by poor end-user demand and terrible producer margins, so continued bullishness upstream will put yet more pressure on PET prices to increase.
"I don't believe [prices] can go down on PET," a second PET producer said. "We will be lucky if raw materials roll over."
A PET customer, however, said: "It's not only feedstock prices that are falling, but PET also," referring to import prices.
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