Buyers move to sidelines amid market uncertainty
There is uncertainty in the European recycled polyethylene terephthalate (R-PET) market over the direction of prices in June because market fundamentals are pulling in opposite directions.
Falling upstream virgin polyethylene terephthalate (PET) prices in May have placed downward pressure on R-PET prices. Virgin PET directly competes with R-PET in downstream markets such as strapping and fibres.
Nevertheless, downward price pressure from the virgin PET market has been counterbalanced by tight supply of feedstock post-consumer PET bottles. Used plastics drinking bottles are the major feedstock for the R-PET chain, and fewer plastic drinks bottles are consumed during cold temperatures. Because of the longer and colder than expected winter across much of Europe this year, feedstock availability is low and post-consumer bottle prices are high, albeit at a stable level.
Firm feedstock prices mean that there is no room to reduce R-PET prices, whereas competition from virgin PET means that there is no scope to raise prices. As a result, prices throughout the chain are unchanged.
Many R-PET buyers have moved to the sidelines of the market, waiting for clearer indications on the direction of prices in June and July.
Flooding in Austria – particularly in the Linz area – has disrupted supply routes through the country. One Austrian flake buyer said that it had closed a warehouse as a result of the flooding, which has caused road closures.
Upstream, virgin PET prices in Europe are unlikely to change much over June and July, although players' ideas differ as to direction.
Justifications for a slight increase in July virgin PET prices include the possibility that European production costs may increase. The summer months normally see higher sales of PET bottles, also. The weather has been unseasonably cold in many parts of Europe, and this – coupled with the economic malaise – has dampened demand for PET applications. Nevertheless, higher production costs may not automatically mean an increase in the price of virgin PET, when it is not supported by healthy demand.
($1 = €0.77)
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