OUTLOOK '18: Europe R-PET, the market that lost its bottle

Source: ICIS News

2017/12/28

LONDON (ICIS)--For many in the Europe recycled polyethylene terephthalate (R-PET) market, the question posed towards the end of 2017 was how much longer availability issues would last.

For the majority of 2017, post-consumer polyethylene terephthalate (PET) bottles were tight and, thereby, upwards pressure was placed on pricing of all R-PET products.

Participants attribute these supply issues to growing demand in the R-PET market, with consumers increasing the capacity of their facilities in spite of no similar expansions occurring with producers.

“I talked to most of my customers regarding the demand for [2018] and they mentioned that they reached a demand increase compared to the former years and they will have that higher demand continuously,” said a recycler.

“So we, for example, we are in the position to sell more or less double the amount of our current capacity, without any issue, just for our current customers.”

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To add to this, various countries in Europe have experienced changes in market conditions leading them to purchase a greater amount of R-PET from other countries in the continent.

In Turkey, for instance, sources say that the country has become an importer of R-PET products having once been an exporter.

“There has been quite some companies in eastern Europe, let's say in Croatia, Poland, Czech Republic and so on, they have bought also in the western Europe market [post-consumer] PET bottles because they did not have enough in their countries,” said a food grade pellet producer.

“There have been new capacities also in eastern Europe, but also in western Europe. That was causing the tight situation and, on top of that, many of our customers that are producing, especially for the film and sheet application, have also increased their capacities again,” it added.

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Consequently, post-consumer PET bottles prices have risen steadily since mid-January to the end of the year with the price midpoint for colourless reaching €422.50/tonne in November as mixed coloured firmed to €302.50/tonne.

While the colourless R-PET flake midpoint rose to €930/tonne with mixed coloured at €642.50/tonne in November as food grade R-PET pellets hit €1,190/tonne.

All of these prices are on a free delivered (FD) northwest Europe (NWE) basis and the majority of these midpoints far surpassed any peaks seen in 2016.

This has raised concerns about the sustainability of any firming trends in the future, especially as participants want to keep a price gap between R-PET products and virgin PET, as both markets compete in certain applications.

There will initially be slight relief, therefore, from these R-PET participants to hear that upwards pressure was expected by virgin PET sources in their market for the first quarter of 2018.

Such anticipations were put forward by virgin PET sellers as imports were not competitive in November and December 2017, domestic material was tight in the same period and preparations for the peak season typically begin at the start of a year.

However, domestic tightness was heightened in 2017 by lower operating rates at India-based producer JBF Industries’ 432,000 tonne/year Geel, Belgium PET plant after the facility was taken offline in August with one line restarting in October.

However, by mid-December the site’s second line began producing again, muddling 2018 expectations for the virgin PET market.

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“What will be the final acceptable gap between virgin and recycled material for the customers where they decide to switch from recycling to virgin and the question is when will we reach that point? Will that be already in the next half of the year or 2019?

“That's the biggest question actually,” it added.

In quarter four of 2017 there were some R-PET sources that said that the Christmas holiday period would lead to increased PET bottle consumption and, therefore, lengthier availability in the post-consumer market in quarter one of 2018.

Nonetheless, these anticipations mostly diminished as the end of 2017 came closer with upwards pressure expected for the start of 2018 due to the continuation of tight market conditions.

“There is a shortage of bottles and I will think that winter time it will not be better. Because in winter time there is always hard time to collect the bottles... So the problem might be until spring,” said a buyer.

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Photo source: Rex Features