US DAK force majeure prompts unusual European PET exports, helps alleviate excess stocks

Author: Caroline Murray

2020/09/11

LONDON (ICIS)--A force majeure declaration by US producer DAK Americas has propelled the European polyethylene terephthalate (PET) market on a new course as an exporter.

Traditionally an import region, Europe is responding to requests for thousands of tonnes to be sent to the US.

DAK Americas declared force majeure on PET earlier this week after Hurricane-related outages in US monoethylene glycol (MEG) restricted its supply of feedstock, according to sources.

“Already more than 10,000 tonnes have been done and there are more to come. It will clear out EU stocks!” a trader said.

Others concurred, with one producer saying it had sold "big volumes" at a higher price than what is achievable in Europe.

Spot prices in Europe moved down just as production costs looked like they were on the way up.

MEG prices spiked due to unexpected supply constraints, but primary feedstock paraxylene (PX) weakened.

-
With crude slipping and negativity continuing to pervade broader economic markets, the European PET arena lost momentum going into September.

-
Buyers are covered, particularly as the fourth quarter is low season for bottlers, and after months of relative silence from importers, some are expecting deliveries by the end of September or in October.

Until the sudden interest from the US, the consensus in Europe was that the market was plateauing and not much would change as the year tailed off, and the new year began.

The market was very much in a wait-and-see position.

“If European buyers try to speculate and are buying small amounts to survive the week at the very last minute, soon Europe can be short, because everyone is now selling to the US and nobody is waiting for Europe to wake up,” a seller said.

Typically, Europe exports less than around 3-5% of its capacity.

With unusual requests for 3,000-tonne, 5,000-tonne, or 10,000-tonne lots this week alone, a spate of scheduled European shutdowns in October/November and tightness in upstream MEG, this could indeed cause a ripple of concern among buyers.

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 picture: Facilities operated by DAK Americas in Charleston, South Carolina
Source: DAK Americas

Focus article by Caroline Murray