PET prices weaken on diminishing feedstocks, lackluster demand

22-Jun-10

Across the globe, spot PET prices have weakened in line with softening feedstock costs and poor demand, as per Chemorbis. Concerns about the health of the global economy and relatively mild weather in Europe have acted to restrain buying interest in the conventional high season for global PET demand. In Asia, export offers for Korean and Chinese PET have lost US$60-70/ton when vs offers reported at the end of May. Softer feedstock prices are the key trigger factors, with spot offers down US$38/ton for MEG and US$15/ton for PTA from the beginning of June. Producers also pointed to higher ex-Asia freight rates as an additional factor hampering their competitiveness in global markets. Although crude oil and naphtha prices have both posted significant increases when compared with the start of the month, this fact has not yet given sellers sufficient negotiating strength to reverse the downward trend in the market. Prevalent offer levels for ex-Asia materials are pegged US$25-65/ton above theoretical cost calculations based on the prevailing spot feedstock prices. In Turkey, offers for domestic material were reduced by US$70-90/ton from producers’ initial June offers this week as sellers conceded to price decreases to attract greater buying interest. Meanwhile, import prices in markets of Turkey are reported US$100-120/ton below the offers reported at the end of May, as traders were compelled to agree to steep month-over-month price cuts in the face of persistently sluggish demand. Converters in the Turkish market have been cautious in their purchases over the past few weeks in an attempt to maintain a healthy cash flow while complaining of slower than expected demand for their end products. Relatively slow demand along with lower feedstock costs also pulled down prices in the European market this month, with PET contracts reportedly being settled with discounts of €20-30/ton from the May done deal levels. Producers reported that the price declines seen in their PET contract prices are approximately equal to the reduction in their production costs resulting lower feedstock prices, although some expressed concern that they may be pressured into giving away some of their margins next month if demand does not begin to pick up over the near term.