Will costs drum up support for a 3rd-month-firming in Europe PET market?
Now that July is drawing near to a close, players are wondering whether the PET market will head for a third month of gains on the heels of a higher upstream chain, but under the shadow of a persistently unpromising demand.
PET demand bears the brunt of pandemic
Although other polymers have seen some revival in buying activities in tandem with improved demand and tighter supplies, this has not been the case in the PET market. Demand has been rather unpromising and it does not offer any glimmer of hope for an improvement in the near term. Apparently, the PET market has been hammered hardest by the COVID-19 pandemic.
This is because the lack of summer festivals and the limitations in the tourism sector have caused PET consumption to reduce significantly across the region. Although the summer should be the high season for PET applications, the market is facing extraordinary times this year. People go to restaurants less often and some have also cancelled their holiday plans.
A South European producer argued that bottles for soft drinks suffered the most while the mineral water sector is still performing rather well, especially for large sized bottles. However, a manufacturer in the mineral water sector said, “As people tend to stay home, we were hoping to see an increase in demand for home consumption. But it didn’t meet our expectations either.”
Upstream costs soared in June and July
ChemOrbis Price Wizard suggests hefty increases of 24% for PX and 51% for MEG in total since the beginning of June. The firming in spot PX prices has faltered to some extent throughout July, while MEG has sustained its upturn up until recently. The outcome of the next ethylene contract will determine the trend in MEG prices as well. PTA prices have been quite unchanged since then, meanwhile.
Will uptrend falter?
It will all be dependent on the upstream gains. Monthly PX contracts are expected to settle with increases albeit in small amounts, considering the recent volatility in the spot PX market. Likewise, MEG will be sensitive to ethylene contracts.
Thus, players think that the PET market may grind higher but with extreme cautiousness. “It’s a very fragile market,” argued analysts.
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