LONDON (ICIS)--European polyethylene terephthalate (PET) August domestic prices decreased from July to August because of poor sales and falling production costs, but the market may be bottoming out, sources said on Friday
Prices remained in the high €800s/tonne FD (free delivered) in southern areas where the weather stayed hot, but bigger decreases into the mid €800s/tonne were common further north.
“Starting from end of last week and this week I see European producers trying to increase the prices, and I see some higher bookings really coming through. I don’t know whether... customers are buying again because they are back from holidays and need to buy, or whether it is really on the back of the oil price,” a reseller said.
August was a varied month, where sudden drops in crude oil values creating uncertainty in an already nervous market environment.
The recovery that followed is setting the scene for less bearish sentiment going forward to September, particularly as next month will also mark the end of the traditional holiday season in Europe.
“Due to delayed behaviour we experience[d], the issue is now that customers are forced to buy, so demand looks healthy. The position has moved quickly to more a position of holding prices to slight upward movement is possible,” a seller said.
Those PET buyers who either need to buy or are speculating on this being the end of the downturn, have indeed been in the market for product. How long this lasts is another matter, with one source stating that it thought the buying spree had already come to an end.
Suppliers still have competitively-priced imports to contend with, which could delay an uptrend in domestic prices.
We are also approaching the time when prices traditionally bottom out as it is the end of the peak season. Add to this the uncertainties concerning raw materials, and the situation blurs once more.
Initial August raw material prices were all agreed below those of July.
The European paraxylene (PX) contract has been fully confirmed at €730-745/tonne on Friday after players failed to agree to follow one of the initial settlement, but MEG producers are yet to follow the initial settlement in that market.
Downstream participants expect MEG feedstock ethylene, to increase slightly from August to September.
“It is a bit too early to say if it will be the exact trend for September, but in general I have the impression there are some factors that argue the trend will now reverse and prices can go up again,” a buyer said.
The exchange rate situation will play its part in any decisions taken. For now, the PET market seems to have stabilised but essentially the markets are very unpredictable and anything could happen in September.
Focus article by Caroline Murray