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European PET demand soars, will it alleviate cost pressure?

by Manolya Tufan - mtufan@chemorbis.com
  • 30/03/2020 (04:03)
In Europe, panic buying in the supermarkets boosted demand for PET applications during March. Still, feedstock costs have seen dramatic drops due to the unprecedented slide in the energy markets. Players are discussing the April outlook amid the opposing factors.

Food packagers, preform makers work at full rates

Consumption of food and beverage packaging soared after coronavirus panic buying emptied shelves. Players reported increased demand for mineral water bottles and packaged food.

This put sustainability concerns aside as consumers preferred to buy packaged products more frequently amid hygiene concerns in an attempt to avoid spread of the COVID-19 pandemic.

Thereby, manufacturers in the packaging and preform industries work at full rates to catch up with their increased orders and supply end products to the hospitals and the army. Still, the manpower at plants is reduced due to the strictly recommended social distancing measures.

“Demand was so good that we were sold out for March earlier than usual,” a few sources from regional producers said.

Seasonal preparations would gradually start around this time of the year, although demand showed an unexpected increase amid virus fears. This may cause the high season to last longer than usual, players reported.

Prompt material favored over imports amid logistics concerns

PET buyers preferred to make some safety stocks due to the possibility of border closures and delays in deliveries due to stricter checks at borders and ports. They mostly sourced their needs from the local market and avoided distant cargos.

Plus, demand has been particularly better in those countries, where lockdowns and containment measures have been recently introduced. A distributor reported, “Buyers flocked to buy to avoid possible delivery delays in the coming days. Panic buying boosted our sales.”

Sharp drops foreseen for March PX contracts

PET feedstocks followed in the footprints of plunging crude oil futures over the course of March. Spot PX prices on an FOB NWE basis have fallen by around $140/ton, or 23%, since early March, according to ChemOrbis Price Wizard. Plus, spot PX prices hit their lowest levels since ChemOrbis started to collect data in 2011.

At the time of writing, March PX settlement was still pending. Meanwhile, expectations called for €80-100/ton drops in the monthly settlements.

Costs to weigh on April pricing

Players think that the April outlook is torn between strong demand and lower costs. The unprecedented fall in the energy markets exerts pressure on prices and PET prices are likely to see cost-driven drops next month. Players wonder to what extent improved demand may mitigate the impact of the cost pressure.

Both buyers and sellers concur that demand will continue to perform well in April, while they believe that this may only help to keep the size of possible drops in check.
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