Europe PET market gears up for higher production costs, despite cautious demand

Source: ICIS News


LONDON (ICIS)--Polyethylene terephthalate (PET) buyers and sellers are preparing for higher production costs to filter through to the March price of PET, despite growing inventories, sources said this week.

The mood has been cautious on both sides. Firstly because goal posts keep moving where feedstock costs are concerned, and secondly because demand is still debatable at this stage.

“We were unsure what feedstocks were doing. We got it wrong when we predicted PET would go up €10-15/tonne,” a producer said, adding that the raw material effect on the PET molecule was likely to be higher than that in March.

Sellers’ individual targets to achieve business above €1,100/tonne FD (free delivered) Europe for March would stick despite the quiet demand for additional domestic volume, the producer said.

Volatility and delayed upstream contract settlements in paraxylene (PX) and monoethylene glycol (MEG) means mistakes may have  been made.

“We bought PET based on PX forecasts that were lower than the initial [settlement]…,” a trader said.

A plethora of exports left China in January, and while February and March may not prove to be quite as dramatic, imports still continue to filter into Europe. This is giving some customers an opportunity to relax somewhat.

“There are now offers of spot, which is unusual for the time of year. The weather is bad. There is no demand,” a buyer said, adding that it had pre-bought in quarter four because of forecasts for higher crude.

For now, it seems customers are more inclined to buy on a hand-to-mouth basis, still unsure as to what lies ahead in terms of macroeconomic and exchange rate volatility. That said, seasonality for PET bottles should play a part, and demand is likely to peak eventually.

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.