Mixed NWE July PET expectations amid strengthening demand, unclear feedstock direction

06-Jul-15

Direction of polyethylene terephthalate (PET) spot price remains unclear going into July, as a heatwave across Europe strengthened buying appetite amid high producer stocks, while a potential "Grexit" raised concerns for the euro and July feedstock contract prices not yet settled, according to sources in Platts. Bids have not firmed yet as people are figuring out the market, a trader in Europe said. Buying appetite improved as converter stocks are near depleted and the warm weather supported demand. Nevertheless, stock levels at producers are at high levels, which have placed downward pressure on the spot price. The NWE spot price was assessed at Eur1040/mt FD NWE Wednesday, down Eur25/mt on the week. The future of Greece's membership in the eurozone has once again been questioned with a potential "Grexit" raising concerns for the euro/dollar exchange rate. Platts heard that attractive import prices had tempted some buyers, pending the direction of the exchange rate. Indeed, the weak euro in January and February led to large declines in import volumes and a tightening in the European market. PET imports into the EU in the first two months of the year fell 27% to 116,508 mt compared with the same period a year ago, according to Eurostat. "Pricing should stabilize, after a slight drop to put off any import interest," a producer added. In addition, July feedstock contract prices have not been settled. The PET market turned bearish on the Northwest European paraxylene contract price for July after Asia failed to settle its July contract price earlier in the week. Sources question the direction of the monoethylene glycol July contract price, after it reached Eur1,107/mt in June, rising over 45% in just four months. Supply has loosened since then and buyers are targeting a decrease. Furthermore, BASF lifted force majeure on its MEG plants in Antwerp and Ludwigshafen on Thursday, which may ease tightness in the market.