Buyers of polyethylene terephthalate in Europe are reluctant to build inventories as they expect PET prices to decline in April, market sources said this week.
These expectations are being driven by weaker upstream markets, as contract prices for feedstocks fell in March and are expected to decline again in April, following several months of feedstock price increases.
"The trend of raw materials is very important, and the change in trend has led customers to wait and see," said a producer.
This has also led to late settlements on some freely negotiated contracts.
"Things are very slow to settle this month. People have waited to see the final raw material settlements. They are keeping inventory tight in anticipation of lower feedstocks in April," another producer said. The European contract price for paraxylene, the main feedstock for purified terephthalic acid, which is in turn the main feedstock for PET, was settled at Eur1,250/mt ($1,616/mt) FD NWE for March, Eur10/mt down on February's settlement.
The decline was led by big falls in Asia where prices are still dropping. Few expect any rebound in global prices in the near future, and sources believe that contract prices will decline again in April, with some arguing that the European CP will "make a deep dive".
Meanwhile, March European contract price for monoethylene glycol, the other key PET feedstock, was fully settled Wednesday at Eur1,070/mt FD NWE, following last Wednesday's initial settlement.
The settlement represents a Eur35/mt fall from February contracts, and MEG is also expected to drop further in April.
Although the PX and MEG settlements indicate a Eur18/mt (to the nearest euro) decrease in PET feedstock costs for March, with further declines expected in April, producers are reluctant to pass the decreases on as they wish to recover margin lost last year.
Many March PET settlements have thus been rollovers, though some buyers have achieved reductions and there have even been cases of increases reported. But buyers said that producers would struggle to push through rollovers if feedstock prices drop again in April.
The expectation of further European price declines combined with the lead time for import delivery also led converters to shy from buying imports despite large falls in Asian prices over recent weeks.
"Last week I got a few calls and the price went down dramatically in Asia so it's more or less competitive now, but if we order now it will only get here at the end of April or beginning of May and then it might not be competitive because we expect prices in Europe to go down more," said a converter.
