Price and market trends: Europe PET producers lower price but defend Feb, March margins

17 March 2014 00:00 Source:ICIS Chemical Business

European polyethylene terephthalate (PET) producers acknowledge price decreases in February and March but have thus far managed to defend margins, sources said on 7 March.

“European producers improved their margins in February and March but it comes on the back of lower output. They gave up on output and went for price,” a customer said.

On average, reduced operating rates and a lack of competitively priced imports have helped to eliminate any prompt length in the market.

EU PET

This, combined with messy upstream contract discussions that led to delayed feedstock settlements, has helped domestic PET producers improve margins after months of them being unsustainable.

A late upstream paraxylene (PX) February contract settlement resulted in a delay in aligning lower production costs to PET prices.

For PET buyers in February it was a case of the earlier the deal, the higher the price.

By March, customers had expected to benefit from February’s eventual drop in the PX price and were targeting €1,050/tonne FD (free delivered) Europe, down from €1,090-1,150/tonne in February and €1,120-1,150/tonne in January.

So far in the week ending 7 March, freely negotiated PET prices at larger accounts were heard around €1,070/tonne in continental north Europe, but higher prices are still applicable in other regions.

“Prices have hardly moved… it depends on the February starting point. Those with February prices at €1,130-1,140/tonne could go down more, but those around €1,100/tonne in February, could go down by €10/tonne,” a seller said.

Asian imports could present a challenge for European producers going into April, but for prompt deliveries buyers have little choice but to opt for local material.

There are, however, players who speculate on higher prices in quarter two.

This is partly based on limited European output, potentially increasing Asian prices and the possibility of resellers holding on to relatively expensive imports.

The outcome remains to be seen.

By Caroline Murray