Europe R-PET market subdued ahead of June price talks

LONDON (ICIS)–The European recycled polyethylene terephthalate (R-PET) market remains subdued ahead of June monthly price talks as it continues to experience a downturn in demand during what should be its peak demand season.

Buyers and sellers canvassed towards the end of May cited high stock levels, low virgin PET prices, offers of cheaper R-PET from outside the EU and a wider macroeconomic slowdown across Europe as factors contributing to lower-than-expected demand.

Drops in PET prices during the month of May has added downward pressure to the colourless (C) and mixed coloured (MC) flake and food-grade pellet (FGP) sectors. Both sectors have seen buyers shift from recycled material to cheaper virgin PET.

Buyers have a bearish outlook for June. One customer said it would be entering monthly talks with bids close to virgin levels, though it also acknowledges it may see a wide range of offers from flake sellers because of variances in feedstock and production costs across the region.

MONTHLY VS WEEKLY
The R-PET market has gone through a prolonged period of volatility in recent years, with record-high prices at the end of Q2 last year, followed by record-sized drops as prices plummeted during the second half of 2022.

2023, and Q2 in particular, has not delivered the recovery in demand that many had hoped for. Consequently, stock levels of post-consumer bottle bales, flakes, FGP and PET preforms are high.

Some flake and pellet sellers said they are now having weekly price talks with buyers, resulting in weekly price drops. Although confirmation of weekly business from the buyer side of the market is not currently forthcoming.

One seller, who said it was selling C flake volumes on a weekly basis, suggested offer levels now sit in the high €1,000s/tonne free delivered (FD) northwest Europe (NWE) at the end of May, due to pressure from virgin PET.

But a buyer in the food packaging sector said it had covered all its needs in terms of volumes for May at the beginning of the month. A second buyer said it simply would not have time to engage in weekly price negotiations for R-PET.

For the time being, majority of buyers are purchasing on a monthly basis.  Still, in a fast-changing and developing market like R-PET, it remains to be seen if this is still the norm, or if new purchasing patterns emerge.

POSSIBLE IMPROVEMENT
While the current market mood is very low, there are hopes that prolonged periods of good weather across Europe may improve PET and R-PET demand during the summer months.

The R-PET market has seen some very quick changes in direction in recent years. The possibility that a hot summer may spark some demand cannot be ruled out. But most market participants are extremely cautious of pinning hopes on a pick-up in demand anytime soon.

Most sources canvassed at Plastics Recycling Show Europe (PRSE) on 10-11 May in Amsterdam estimated stock levels to be anywhere between one to two months. So these stocks would need to be drawn down, and restocking activity pick up and be sustained until Q4 to see any significant impact on demand.

Plus, wider macroeconomic conditions and high inflation rates across Europe are seeing changes in consumer spending patterns.  This may mean that even if hot weather arrives, consumers may choose to be more conservative with their money.

For the time being, the R-PET market is very much focused on the present, and what cheaper PET and overall low demand mean for R-PET price levels for June.

Focus article by Matt Tudball