Europe’s PET demand sees signs of improvement after several months of weakness

The PET market opened July on a slightly firmer note, halting a three-month downturn and leading to a rebound in prices, which hit their multi-year lows last month. Together with higher prices, PET participants reported an improvement in demand in the first week of July, mainly due to the hot spell that hit Europe.

Market starts to absorb hikes

Suppliers approached the market with increases of up to €30/ton in early July, while hikes of €10-20/ton are currently passing on deals. Following these hikes, local PET prices moved back above the €1000/ton FD threshold on the high end of the current range, in line with suppliers’ intention.

A West European producer slightly revised its initial hike requests down, but it is still obtaining increases of around €20-25/ton in its sales. A source from the producer said, “It is not just about firmer prices as we noticed a pickup in demand in the first week of July. The heatwave that hit Europe led to many last-minute orders and buyers are accepting hikes for now.”

A distributor selling local material commented, “Prices are finally up after a few months of bearishness. A reversal of the trend was necessary as regional producers have been selling below costs in the last few months.” The seller added that, even though buyers had stocks, they preferred to secure more volumes after noticing a rise in their order entries as they want to be comfortable with their inventories.

Costs are partially supportive

Suppliers’ firmer stance, with sellers anticipating possible hikes already in June, was mostly driven by increases seen in the energy complex, before crude oil markets dropped again amid the de-escalation of tensions in the Middle East. With the June PX and MEG contract settlements still pending, suppliers were hoping to see previous energy hikes reflected on monomer markets as well.

As of last week, the June MEG settlement was finally concluded with a small decline of €12.50/ton, which suppliers deemed mostly irrelevant.

This week, the June PX contract has also settled with an increase of €20/ton in line with sellers’ expectations.

Hence, a mild support from the cost side is actually in place, although the current firmness seems to be mostly sustained by improved demand.

Another factor that has supported regional suppliers so far is unattractive import markets. Recent offers are mainly hovering at around the €900/ton CIF level, with delivery in September/October. Hence,buyers are preferring to secure local resins amid short delivery times.

Will demand remain in place?

The improvement in demand was mainly seen in the mineral water and beverage industry rather than in other packaging sectors as the heatwave pushed consumption of bottled water and soft drinks.

However, converters in the bottle sector are cautiously optimistic as they are waiting to see whether the recent surge in their order entry is here to stay in the weeks ahead, as demand lagged behind seasonal patterns last month.