05 April 2013 23:59 [Source: ICIS news]
By Caroline Murray
LONDON (ICIS)--The value of European polyethylene terephthalate (PET) has decreased because of falling raw material prices, sources said on Friday.
Both paraxylene (PX) and monoethylene glycol (MEG) are set to drop from March to April, influenced by the dominant Asian market dynamics, industry sources agreed.
"Realistically I would say probably that the [MEG contract price] decrease will be in line with ethylene, so €40-45/tonne. Producers want to increase margins again. I don't see they have stronger argument," a source from the MEG market said.
Several downstream sources predicted the European PX April contract price would settle down by €50-80/tonne, but the magnitude of the losses in the dominant Asian market has seen some of them revise ideas to around €100/tonne.
Exchange rates are bound to play their part in the outcome and some say currency will stifle the drop on raw materials such as PX.
Despite bearish sentiment the PET market is relatively balanced, helped by shutdowns and reduced capacities for technical or market reasons.
"I believe there is not so much material freely available as the demand picks up, and although one would say Asian material would come through later and so cap the price, this does not seem to be the situation," according to a PET producer.
Buyers are unsure whether to buy now or wait for lower prices to emerge and sellers are not in a rush to offer product, with a couple saying the bottom has already been reached.
There are also areas where prices are holding firm because customers have little choice on offer.
"Customers are not buying because they bought low priced imports and end demand is not high. So they are out of the market…Other customers haven't imported, they are not sure of the situation and are paying more," a second producer said, speaking in Spanish.
The persistent cold weather in northern Europe is putting an additional dampener on an already beleaguered demand situation.
"We would expect PET demand to be up but since it is so cold in the north we don’t see it picking up very quickly," a supplier of MEG said.
Sellers of PET are determined to maintain margins and some believe they can improve on them this month. This follows months of what many see as unsustainable margins.
A maximum drop of €45/tonne ($58/tonne), or down to €1,250/tonne, is what various commentators expect for April PET. It should be noted that these assessments have been made prior to the settlement of upstream contract prices.
PET prices are recorded within a range of €1,260-1,330/tonne FD (free delivered) Europe, according to data from ICIS.
This shows a decrease from the March price of €1,300-1,330/tonne.
($1 = €0.77)
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