Europe R-PET producers hope for September margin improvement

18 August 2014 16:54 Source:ICIS News

LONDON (ICIS)--European recycled polyethylene terephthalate (R-PET) prices have remained broadly stable in August, amid reduced market activity due to the European summer holiday period, but some players are looking to recover thinning margins in September, sources said on Monday.

A few players noted minor increases on R-PET flake prices in August, but these were only heard by a small number of players and in the range of €10-20/tonne. The vast majority of players spoke of rollovers for both post-consumer bottles as well as R-PET flakes and pellets.  

Post-consumer bottles are the primary feedstock for the R-PET chain.

R-PET flake and pellet producers spoke of the need to lift prices and recover margin, on the back of post-consumer bottle prices edging up in previous months, because of relatively tight availability.

“Active situation is a rollover from my point of view. Got much more [post-consumer] bottle availability,” a flake and pellet producer said.

“For September we think the flake price has to go up a bit. The difference between bottle and flakes is much too low in the last month. No margin in flakes,” it added.

“Bottle prices went up sure and flake has not. They [converters] don’t have much margin to give up,” a packaging producer said.

Nevertheless, a relatively low virgin polyethylene terephthalate (R-PET) price, on the back of cheap imports and rising European capacity, has imposed a ceiling on R-PET prices.

Market players fear that with the bottling season slowly drawing to a close, and with new virgin PET capacity coming on stream, virgin PET prices could face downward pressure and this would likely have to be reflected in R-PET prices.

A flake producer said: “There is no margin in [R-PET] flake and pellets, it is extremely tight. If bottles go down, we can protect the flake spread, great. The virgin [PET] pricing we see went down a bit, could go down further, but it depends on crude situation also. If virgin stays stable, or virgin goes down, we cannot raise prices, people will switch to virgin.”

R-PET competes directly with virgin PET in some applications.

Traditionally, availability of post-consumer bottles in northwest Europe rises during the July and August summer holiday period as this is the peak period for bottled drinks consumption and recycling. This seasonally higher supply, traditionally results in lower prices, though this year, a summertime surge in bottle supply has not emerged and prices have held up.

Most market players say there should be more bottles in the market, but no one knows where they are.

“[availability of post-consumer bottles] it’s rather tight, especially for the season. I don’t know why bottles are tight. In October the bottling season ends, nothing is held back,” a packaging manufacturer said.

Nevertheless, a few market players in northwest Europe said that availability appears to be improving and expect this increased availability to result in lower post-consumer bottle prices in September.

Lower post-consumer bottle prices in September might open the door for some flake and pellet margin improvement, but demand levels remains to be seen, as does the virgin PET price, going into September.

“I think what has to happen is that bottle prices have to go down or recyclers will really face difficulties for too long periods. I'm sure for some months they can work without margins, but not 6 months. Really, everything will depend on bottle prices,” a packaging producer said.

Sources say they are hopeful for margin improvement, but a lot of factors remain to be seen.

By Iain Packham