Europe PET buyers mull higher purchases as logistics costs surge, traders' woes increase

Author: Caroline Murray

2020/11/20

LONDON (ICIS)--The European polyethylene terephthalate (PET) market has firmed on the back of surging logistics costs, with higher import offers as the ongong shutdown season has reduced domestic production.

Higher import prices would give European sellers an opportunity to firm prices; on the other hand, buyers remain cautious due to underlying demand patterns.

Turnarounds began earlier than expected, and is now expected to end later than planned due to coronavirus restrictions.

ALL ABOUT ASIA
“It [the European market] is short because all the Asian countries are producing and exporting, and not importing, because of Covid-19," a trader said.

"Containers are not coming back empty. There are fewer than usual,” it added.

Smaller vessels are being used where possible as they are cheaper to moor, but that has reduced vessel space, the trader added.

The cost of shipping from Shanghai to Italy was $800-$900/container in October, but today it would be difficult to get $2,500/container, a source in Italy said.

Sending product from South Korea to Europe has been heard to cost as much as $3,000/container, or even more.

“Customers accept higher [domestic] numbers nowadays. Customers want to secure their volumes. They want to be safe because they are unsure what is coming from Asia,” a second trader said.

“PET enquiries for January and Q1 are emerging from local EU customers as imports look unreliable,” a producer added.

SEA, ROAD, RAIL
The logistical woes have gone from “serious” to “severe” in a matter of weeks.

The cost of buying a container in China would often match the price of shipping an empty one from inland US to China, for example.

This, in turn, added to the container shortfall, a third trader said.

A shortage of truck drivers in Europe and the US has meant there has been a switch to rail transport, thereby driving up the cost of railway travel, too.

Recent forecasts of “exceptionally low demand” going to year-end, could quickly change if customers who are not covered see evidence of prices moving up.

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: Qingdao port in Shandong province, China; archive image
Source: Sipa Asia/Shutterstock 

Focus article by Caroline Murray