European PET markets open Sept on a bearish note

PET prices have been on a downward spiral in Europe as record-high inflation has taken its toll on derivative consumption. Other factors that stymied the impact of seasonal patterns have been the holiday lull in August and competitively-priced import cargos stemming from easing freight rates. Most players expect the market to extend its losses into September.



Post-holiday demand appears tepid amid weak projections

Demand was subdued during August given the long summer break, while widespread expectations of additional declines for September also kept purchases at a bare minimum. Eurozone inflation hit a new record high of 9.1% last month, according to Eurostat, with high energy prices remaining the main driver. Needless to say, the reduced purchasing power mitigated the traditional high season in certain end-product markets.

A distributor opined, “High energy prices remain an issue. Buyers are securing only their needs given the elevated utilities. We do not expect to receive many inquiries in September but it will also depend on the weather conditions. At the same time, some companies may halt production due to high costs in the long run.”

Import PET still provides a competitive edge

Regional markets have been under pressure from attractive import cargos as easing shipping costs amid slowing global trade has led to more volumes from overseas producers. A converter in the mineral water sector in Italy said, "We avoided securing local material due to elevated prices and expectations for reductions in September. We opted to secure some import Asian cargos priced below the €1400/ton DDP threshold."

Asian cargos were traded as low as €1350-1370/ton DDP Italy with delivery in September, which stood around €150/ton below the low end of the spot market. Some converters voiced their next buy ideas at €1300/ton with the same terms.

Distributors confirmed, “European PET cargos posted triple-digit drops in some cases while import materials were still cheaper. Lower freight rates prompted some converters to look at imports.”

A seller said, “We initially applied rollovers for August before stepping back while visible drops passed on transactions. We struggled to achieve sales as PET prices are still deemed too high. For September, we heard that the pressure from attractive import cargos may lead to 3-digit decreases.”

Elevated utility costs may keep declines in check

The majority of PET players expect prices to see sizable decreases in September, with some of them saying, “Offers may see up to triple-digit losses now that the latest PX contracts slumped.” August PX contracts were fully settled €170/ton lower month over month. Besides, several players confirmed that initial MEG settlements indicated €60/ton declines. The waning season, record-high inflation, and the ongoing pressure from import Asian origins will probably pave the way for a new round of declines. Yet, some participants believe that elevated utility markets may keep possible PET drops in check going forward. The slated PET turnarounds for Q4 may also support the market to some extent.