Europe PET demand needs to improve for sellers to claw back margins in April

LONDON (ICIS)–The European polyethylene terephthalate (PET) market is quiet but tense as demand in many places lacks the usual momentum and production costs have risen.

– Season fails to pick up
– Caution on April production costs
– Demand needs to improve

SLOW SALES
The response to negativity in financial sectors has resulted in customers waiting before buying.

There are areas where sales are doing well, due in part to warmer weather that traditionally marks the start of the bottle season.

“…the weather is very good and the contracts we are supplying are at the highest levels,” a seller said.

In general, this year hosts a heavily contracted market, and one that has had an increased interest in importing material from Asia. This activity dates back to 2018 when supply became dire just as people needed the product most.

The fact many customers have product in stock already gives them a chance to wait longer than perhaps they would have in previous years.

“This year, I think some are scared from last year, so they made more contracts, and have more stocks. We were all empty last year,” a buyer said.

FEEDSTOCKS
Asian raw materials tend to lead the way in terms of price direction along the chain, and paraxylene (PX) has been looking bearish with imminent capacity increases.

“Also PX came down [in Asia] and is expected to come down next two months also in Europe,” a second buyer said.

How this pans out is still unclear but industry sources say there is a possibility that following the rise in March production costs, they could flatten out for April.

In which case, PET sellers may choose to attempt to retrieve the margins they lost in March.

“The March increase hasn’t gone through yet…In April they will try and recuperate what they didn’t get in March, if the season picks up a bit,” a reseller said.

It should be noted that the March monoethylene glycol (MEG) contract price has not yet been fully confirmed.

DEMAND
In order for this to happen, demand really needs to pick up, and there are those who envisage a period of mass buying that could push the price of PET up, notwithstanding what happens with feedstocks.

“If demand doesn’t pick up in April, I don’t think there will be a price increase, because our projection is that PX will remain quite flat,” a second seller said.

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.

Focus article by Caroline Murray

Picture source: Guenter Fischer/imageBROKER/REX/Shutterstock)