25 March 2013 23:59 [Source: ICIS news]
LONDON (ICIS)--European recycled polyethylene terephthalate (R-PET) food grade pellet prices have fallen by €100/tonne ($130/tonne) at the top end of the range, sources said on Monday.
This is the first change in food grade pellet prices since 8 October 2012.
The fall was attributed to weak demand and expectations of falling virgin polyethylene terephthalate (PET) prices in April. Virgin PET and R-PET directly compete with each other in end-use applications such as packaging.
“Virgin [PET prices are] expected to decrease so [packaging] convertors buying less [food-grade pellets]. Maybe they switch to virgin [PET] on the price difference,” a food-grade pellet producer said.
Demand from the bottling market would normally be entering its peak season. Nevertheless, cold weather across Europe coupled with poor macroeconomic conditions have limited the consumption of bottled drinks.
“Normally Easter is very important for pre-forms [used to make drinks bottles]. Because of bad weather, consumption will be less ... consumption is less,” another food-grade pellet producer said.
Domestic virgin PET prices are currently at €1,300-1,330/tonne FD (free delivered) Europe, but are expected to fall, placing downward pressure on R-PET food grade pellet prices. Several food-grade pellet buyers and sellers are expecting prices in April to fall a further €50/tonne in order to restore a cost advantage against virgin PET.
The virgin PET market in Europe has come to a standstill as buyers wait for a decrease on weekly domestic prices. However, sellers are in no rush to lower their offer prices.
Customers said that with raw materials prices finally falling, they have no intention of buying until the decreases are reflected in the price of virgin PET.
Virgin PET sellers, though, are holding out at current levels. They have been fighting to improve dire margins and although production costs have come down, raw materials remain expensive.
Additional reporting by Caroline Murray
($1 = €0.77)
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