PETpla.net Insider 05 / 2018

MATERIALS / RECYCLING PET planet Insider Vol. 19 No. 05/18 www.petpla.net 12 High prices now the norm Since around the middle of last year, converters and bottlers companies have been confronted with a particular situation, one they are not familiar with. PET prices have been constantly moving, and only in one direction: upwards. Anyone betting on the PET market easing in 2018 would certainly have lost their money over the past three months. At the beginning of 2017, many processors would not have thought it possible that the price could still increase by €140 per tonne within 8 months. Last August, PET was fetching €1,578 per tonne; by March 2018, the price had risen to around €1,718 per tonne. There are many reasons to explain this upward swing. Blaming it solely on the increase in the price of feedstock alone would be a mistake. Feedstock prices off the scale Oil prices are also trending in one direction, namely upwards apart from few exceptional price reduc- tions, but these did not disguise the overall trend. It has even happened with crude oil, something that many thought unlikely. In August, a barrel of Brent, located in the North Sea, cost around $US50. As of 18 April, Brent crude is fetching $US72 per barrel. Analysts suggest this is par- tially due to a reduction in American stock levels. Similarly, feedstock prices, essential in the manufacture of PET, have continued their upward trajectory. The market seemed to settle down in the autumn, but this did not have the promised effect, as a comparison over a longer time- frame reveals. From August 2017 to March 2018, paraxylene prices increased by €90 per tonne: over the same time period, MEG prices increased by €107 per tonne. These increases in feedstock prices cannot wholly be laid at the door of high oil prices. There are other factors: increased demand in Asia, tensions in the geopolitical arena, and even currency fluctuations are all helping to inflate prices. Limited availability boosts manufacturers Total European PET production stands at around 3.3 million tonnes, but current demand is at 3.6 mil- lion. As such, every production line that fails, regardless of the reason, impacts availability. Naturally, the price of goods which are in short supply increases. Since last year, this has also been the case for PET. The spot market had practically dried up. Anyone who had depleted their stocks in the hope that the market would settle down, and was still striking it rich in the spot market, paid for it with high prices. It is no wonder that PET manufacturers were in buoyant mood in 2017. They were able to achieve high margins in the second half of 2017 in particular and had already wrapped up their contracts profitably in the autumn. In addition, they reaped the benefits from gaining numerous new contrac- tual customers who were banking on security and who were tired of depending on the unpredictability of the spot market. Shortages not recovered JBT Industries (India), to name but one, played their part in the shortages on the PET market. The business had to shut down their pro- duction plant in Geel, Belgium, half- way through 2017 due to problems with liquidity. This plant had a capac- ity of 430,000 tonnes and as such contributed over 13% of Europe’s active production capacity. Even the company’s plant in the United Arab Emirates could not produce more. Plants owned by other European PET manufacturers were not able to make up the resulting shortages. They did, however, benefit from the higher prices that they were able to charge due to market demand. Even when JBT Industries started to run one production line in November 2017, and later two, it did not have any impact on price or availability during the first quarter of 2018. The Mexican branch of the Mossi Ghi- solfi Group going insolvent last year must have also played its part, with consequences also ensuing for the European PET market. The business was capable of producing 560,000 tonnes of PET and mainly supplied South and North America, yet they pulse PET price in *Euros per tonne, free delivered from March 2017 to March 2018 MATERIALS Special PETplanet Pulse, the PET price index, is e-mailed on a monthly basis to all subscrib- ers of PETplanet Insider as a complementary service. pulse