LONDON (ICIS)--The polyethylene terephthalate (PET) market is “red hot” and the tightness may continue through the peak bottling season, sources said on Friday.
“The market is very tight and it may not change before the end of the high season,” a source said.
The build up to the peak season was disappointing and three plant shutdowns in March failed to disrupt the market. This was partly due to the cold weather and the now heavily contracted market.
Domestic producers have seen their raw material based contract margins improve in the last two months.
There were some expectations that by May, spot PET would still be around €1,100/tonne. But a sharp increase in Asian prices, and two force majeure declarations in upstream purified terephthalic acid (PTA) have effectively ramped up the pressure in Europe.
So much so that there is "close to €100/tonne" difference between raw material-based contracts and spot.
There are limited, fresh cargoes available from Asia before the traditional end of the season in Europe, there is very little domestic spot available, and there are no options for buyers to purchase cheap material. This could mean more weeks and even months of bullish behaviour, particularly if there are still spot gaps to fill.
On the other hand, this market has been testament to rapid changes in the past.
“It’s really hard to predict and the market changes so quickly…everything could change in one day…,” a converter said.
If buyers cover themselves and sellers manage to survive despite upstream curtailments, then there is little reason for much variation, or at least for PET prices to increase further.
For now though, it's a matter of deciding whether or not it is worth buying at relatively expensive prices now, even for delivery towards the end of the season, just to be safe.
PET is used in fibres for clothing, containers and bottles for liquids and foods, thermoforming for manufacturing, and in combination with glass fibre for engineering resins.
Focus article by Caroline Murray
Picture source: Photo by imageBROKER/REX/Shutterstock