LONDON (ICIS)--Pre-buying activity has propped up polyethylene terephthalate (PET) and purified terephthalic acid (PTA) demand in Europe, as buyers are attracted to current prices, but the markets remain cautious given the pessimistic outlook for the economy.
"We are seeing November with an improved [PTA] demand compared with previous months. Some pre-buying activity on PET might be one of the reasons of this increased activity," a seller said.
Domestic PET prices have been trending down more or less, since the summer of 2018, and have averaged levels not seen since early 2016.
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They are low enough for customers to consider buying forward, despite having lost out earlier in the downtrend.
“It was quite a rough third quarter and will be a rough fourth quarter,” a trader said.
The combination of economic malaise, vast volumes of imports that arrived earlier in the year, and bad weather in the traditional peak season contributed to the price decline.
Sellers defended their region by reducing price offers to create obstacle for importers.
Big customers have to pre-brought and hedged large volumes. Others have purchased imports in order to have good supply in early 2020, which they believe will also help in their contract negotiations.
The situation does depend on source, as not everyone is in the position to be able to buy, or considers the market too bearish to do so.
The point being, that if true, a knock-on effect of problems with raw materials or indeed of PET assets failing to maintain expected output may well change the course of events.
So while the mood is downbeat in multiple aspects for the markets, the PET industry has been known to catch the market off guard in the past, and may well do so again.
PET resins can be broadly classified into bottle, fibre or film grade, named according to the downstream applications. Bottle grade resin is the most commonly traded form of PET resin and it is used in bottle and container packaging through blow moulding and thermoforming.
Fibre grade resin goes into making polyester fibre, while film grade resin is used in electrical and flexible packaging applications. PET can be compounded with glass fibre for the production of engineering plastics.
Image source: Gian Ehrenzeller/EPA-EFE/Shutterstock
Focus article by Caroline Murray