Europe PET market braced for potential impact of BP PTA force majeure

06 April 2018 12:59 Source:ICIS News

LONDON (ICIS)--Players along the European polyethylene terephthalate (PET) chain were bracing themselves on Friday for a further squeeze on supply in the event that an upstream force majeure lingers into the second week of April.

BP declared force majeure on a 600,000 tonne/year line at its PTA facility in Geel, Belgium, earlier this week, compounding supply tightness for the material in Europe.

“If it will be [lifted] this week, it won’t be a big issue, but if it will be in two weeks, taking into consideration the volume of BP... it will have a big impact,” a producer of PTA said.

The PTA market was balanced to tight in the first quarter, due partly to delayed deliveries from Asia and a pull on material for downstream, contractual production.

A shutdown at BP’s Belgian facility compounded the issue, and now there is a declaration of force majeure.

BP has not commented on timings, but some industry participants have speculated that it could restart within the next day or two, while others are braced for it to last one to two weeks.

If the latter case holds true, the ripple effect could be significant, particularly on downstream PET. There have already been hints of the force majeure negatively impacting production at one PET plant, but there was no comment from the producer.

More PTA could be imported, but Asia is not flush with material either.

The market is precariously close to a potential run on PET, as the build-up to the traditional peak season has been an unusually tricky period to source extra product. Not impossible, as accounts are secured largely under contracts, but the normal windows of opportunities for additional domestic and imported purchases have been scarce.

It has got to the stage where Asian material bought now may only be available for delivery in July, which in the past has hailed the onset of softer pricing.

“I never saw in my whole career such a long period of shipping time from Asia…When I ask for Asia offers they are for end May shipment and June shipment. It arrives mid-summer, creating stress,” a customer of PET said.

There was nervousness along the chain before the announcement of a force majeure declaration on PTA, and now it and its potential impact on availability, are hot topics. For now though, it is based on guess work.

Next week the PET and PTA markets should be clearer as to what they should expect, both in terms of demand and supply.

PET is used in fibres for clothing, containers and bottles for liquids and foods, thermoforming for manufacturing, and in combination with glass fibre for engineering resins.

Pictured: BP's Geel, Belgium, plant (source: BP)

By Caroline Murray