Opposing factors create varied scenarios in Europe PET for the rest of Q1

Author: Caroline Murray


LONDON (ICIS)--Polyethylene terephthalate (PET) is relatively flat in Europe, but opposing factors such as higher freight rates and poor producer margins, versus generally weak demand and ample supply, are causing mixed views on what lies ahead.

“Europeans have good order books for January, but for February, March and April they aren’t great. The importers all have high stocks,” a trader said.

With prices considered low at the end of 2019, customers bought ahead for first-quarter delivery.

Dips in the value of crude oil amid lacklustre economic news is creating a cautious environment. Add to this the detrimental image of plastics and even the spread of the Wuhan virus and demand overall looks downbeat.

Even the optimism defined by developments in the US-China trade war have done little to motivate the industry.

European PET producers, though, are focused on margin improvement, so any sign, however slight, of bullishness upstream seems to offer them a chance to individually increase the price of PET.

H2 2019 saw European suppliers lowering their offer price in a bid to oust cheaper imports from their home market. From January the markets are also contending with higher freight rates amid the IMO 2020 regulations.

While there were still import deals made for delivery in 2020, today’s offers from Asia do not look attractive, so come mid-February, customers may well be on the look-out for pre-season domestic material.

“If people feel that the season is coming or want to prepare more for the season, there may be small pre-buys for March, if they all feel that a price increase is coming. This would be normal,” a customer said.

The unusual weather patterns in 2019 had a negative impact on the sale of PET into bottles. Similar could happen this year, although temperatures have been higher than normal in certain areas, and this could perhaps pave the way for an early rather than late summer season.

With so much more exposure on the spot market in 2020, the combination of elements already mentioned, or even a shutdown, could create momentum in the PET market.

For now, the market is waiting to see what sentiment is like after the Lunar New Year, and prices remain in the mid-to-high €800s/tonne FD (free delivered) Europe.

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.

Front page image source: Keystone-SDA/Shutterstock

Focus article by Caroline Murray