Stand-off between PET buyers and sellers spans Europe and Asia

Source: ICIS News

2019/03/08

LONDON (ICIS)--Polyethylene terephthalate (PET) markets in both Europe and Asia are showing upward pressure on production costs in what should be the start of peak sales, yet buyers in central Europe are holding back.

- Feedstock costs firm

- Central Europe buyers reject higher prices

- Impact of Asia imports to Europe

There is evidence of the anticipated rise in March feedstock costs, with a paraxylene (PX) contract already concluded in Asia, which, as the dominant market, would normally translate to higher prices in Europe. The pressure is on.

However, this is failing to prompt the usual effect of increased PET sales prior to an expected price increase.

BUYERS' REACTION
Sellers in Europe have been separately targeting moderate price increases for March PET, and while there has been some success, a lot of European buyers are rejecting the higher numbers and pushing for a return to February prices.

“After the hiatus of Q2 last year, [producers] managed to hold on to margin, so if we ask for €20/tonne [more] and raw material proves to be €30/tonne, then it’s not a disaster,” a seller said.

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Buyers say they have sufficient stock with contract commitments and imports arriving, but sooner or later they will have to commit to more.

IMPORTS
Imports from Asia are often cause for debate in Europe, but in Q4 2018 the issue became heated.

In response to significant increases that sellers proposed for conversion fees, buyers committed to what looked like good import deals at the time.

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Some customers ended up losing out price-wise when product eventually arrived, but still, product arrived, and in big lots.

Come January, customers bought more material because prices were good for them, and there was expectation of another hike.

“People thought prices would go up, so they prebought. Most probably buyers have stopped buying and are putting pressure on sellers in the hope they buy at better prices in a few weeks’ time,” a second source said.

Now there is a mixed picture emerging, which is causing confusion. One scenario sees buyers holding out, but in another scenario customers need the product and would rather commit to it now before prices increase further, if not in March then likely April. The latter is partly true of warmer countries and parts of east Europe.

Fresh import offers are not now proving to be competitive enough compared to current pricing of local suppliers and arriving goods.

The subdued buying interest from central European buyers is affecting the mood of Asian sellers, though Asian sellers have been able to turn to other markets that have shown signs of demand pick-up since end-February.

As Asian feedstock purified terephthalic acid (PTA) and monoethylene glycol (MEG) prices saw increases in the week, Asian PET producers increased offers on the back of higher production costs.

The uptrend spurred buying interest and now some central European buyers have returned to the discussion table, though a buy-sell gap continued to hinder some sales.

However, the exchange rate of euros against the US dollar was not in favour of European buyers for US dollar-denominated discussions in the week.

In the meantime, Asian sellers could actualise increases of around $20/tonne in their sales on the back of improved sales to other markets, despite lacklustre support from central European buyers.

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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.

Picture source: Martin Poole/Mood Board/REX/Shutterstock

Focus article by Caroline Murray and Hazel Goh