PETpla.net Insider 12 / 2013

MATERIAL / RECYCLING 18 PET planet insider Vol. 14 No. 12/13 www.petpla.net Is PET entering a new era? Francesco Zanchi, Founder and CEO of GSI Global Service Interna- tional, highlighted the fundamentals and the expected new course of PET markets. He started with a few signifi- cant figures:  World PET demand 2013: 18.6 mil- lion t, 6% increase against 2012  world PET production Capacity 2013: 24.5 million t, 8% increase against 2012  world PET surplus 2013: 6 Million t  Chinese PET surplus 2013: 4 Mil- lion t Factors having an impact on PET prices:  In such an overcapacity situation, PET demand does not influence PET price  PET prices are mainly driven by raw material prices  raw material prices are conditioned by demand for polyester fibres  demand for polyester fibres, in its turn, is influenced by the price of cotton In terms of PET prices volatility, Zanchi pointed out that buyers can turn it into an opportunity by a proper management strategy, namely low risk, through yearly contracts with competitive suppliers able to sell in open credit and deliver on call and high risk by purchasing significant volumes at the most favourable time. Chinese PET market China, with its current PET capac- ity of more than 7 million t/a, expected to become 8 million in 2014 and mainly based on state of the art tech- nology, has a large surplus (4 million t) and its exports have been growing from about 100,000t in 2004, when GSI opened its office in Changzhou, to the current 1.5 million t, expected to become about 2 million t in 2015. However, it is not in a position to send PET to the EU because of the Anti-Dumping measures, although its large exports to Eastern Europe and to other countries near to the EU are certainly influencing the EU price level. China is the world’s largest exporting region followed by North- east Asia, South & Southeast Asia, North America and the Middle East. In 2012 the global PET trade flow amounted to about 3.9 million t. EU PET market: Zanchi presented the EU 27 PET supply and demand balance which is negative in 2013 at about 350,000t and is expected to remain negative also in 2014. Projections for 2015 and 2016 show a small surplus. The new capacities preparing to target the EU PET demand amount to a total of about 2.3 million t/a (80% of the current EU PET demand). Out of this 640,000t are located in the EU and 1,640,000 outside the EU, in coun- tries which will have 0% duty. In the 2013 -2016 time horizon, the amount of capacity in a position to target the EU market with 0% duty will grow by an additional 5 million t/a. The graph of EU PET Imports shows a growing import trend starting from September 2012, and the GSI PET yearly import forecast into the EU indicates a total of 550,000t for 2013 and of 750,000t for 2014. The most important coun- tries of origin in 2014 will be India, South Korea, Egypt, Turkey, Thailand; the main destination countries are expected to be Italy, Belgium, Ruma- nia, France, and Spain. In 2010, 2011, and 2012 a large share of the imports came from coun- tries having a duty higher than 3%, whereas, in 2014 and 2015, imports will be mainly coming from countries having duties of less than 3%, namely the plants located in countries having 0% duty. Zanchi then calculated that an import duty of 3% and of 6.5% on a PET price of € 1,200/t DDP would cor- respond to €35/t and €72/t, specifying that the value of duty reduction will be shared between the EU PET Buyer and the non-EU PET Exporter. In this connection he asked two questions:  Which EU PET producer will be in a position to face the increased competitiveness of the PET export- ers to the EU? In answer to this question, he pointed out that many European producers will have difficulty compet- ing and mentioned CEPSA as being the best European partner for 2013 contracts by virtue of its shareholder solidity, the complete integration from oil to PET at its San Roque plant, located inside the largest Spanish refinery, and its many future plans to increase its presence in the polyester industry.  What will be the impact of more competitive PET prices on Euro- pean PET demand? Concerning the second question, he noted that more competitive PET prices will positively impact on EU PET demand for three reasons:  fewer preforms and commodity APET sheet imports  more export opportunities for these articles produced in Europe  additional demand created by more competitive PET against other packaging materials. EU PET business environment On the basis of the above con- siderations, GSI is forecasting PET imports into the EU in 2015 and 2016 at 800,000t, and this would push down the utilisation rate of the EU PET production capacity to about 65%. A further rationalisation of the EU PET industry might therefore become necessary. Zanchi ‘s presen- tation closed with an exercise: What will happen to PET prices if oil prices go down to US$70 barrel in 2018? If this should happen, PET prices can be evaluated at US$980/1,020/t, FOB Asia, and €780/820/t, DDP Europe. Considering the EU price of €780/820 /t, Zanchi asked two ques- tions:  Will bio-PET and RPET be capable of competing with Virgin PET?  Will a lower PET price generate incremental demand? The presentations at the PET Day in Artimino Villa, Tuscany, Italy, dealt with the tradional topics and global trends of the polyester raw material.