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Threat of imports, weak demand push NWE May polyethylene terephthalate price below Eur1,000/mt

Increase font size  Decrease font size Date:2017-05-02   Views:546
The spot European polyethylene terephthalate price has dropped below the Eur1,000/mt psychological barrier, under pressure from a potential demand switch to imports in a market with lackluster buying interest.

The spot PET price fell Eur35 Wednesday to a near four-month low of Eur985/mt FD NWE. The spot price was last lower January 4, when it stood at Eur970/mt, S&P Global Platts data showed.

"Three digits is now the new market, but buyers are still holding back," a trader said.

Demand has been lackluster as buyer expectations remain bearish on prices, putting downward pressure on market fundamentals as buyers hold back from actively covering requirements.

"Feel is bearish on the market, while the feedstock front is also looking stable or slightly weaker," a buyer said. "The strength in the euro exchange rate also needs to be factored in now."

The euro exchange rate had climbed above the $1.09/Eur1 mark, which substantially improved import economics. Buyers were now eyeing imports from Asia as a substitute, prices of which worked in the mid-Eur900s/mt.

The FOB NE Asia PET price was last assessed at $910/mt Wednesday, down $10 week on week.

Although the earliest deliveries on imports would now be in June, buyers seemed to be in no rush to buy for the summer season.

"I have been covering requirements through [feedstock price based] contracts," a second buyer said. "There is no need to go to the spot market as demand has not been strong for now."

While May had traditionally been among the strongest month for PET demand in Europe, buy interest has remained weak this Q2 as cold weather conditions have kept demand subdued for downstream bottled drinks. This has encouraged buyers to keep procurement at a minimal, to avoid high cost inventories.

Although many producers had previously thought converter inventories to be dry and expected replenishment in May, skepticism was rife whether this was the case.

"Buyers are even postponing [deliveries of] smaller volumes by a few days, as demand remains pretty weak. I think they have enough inventories to keep their operations running," the trader said.

While the May PET appetite outlook remained weak albeit cloudy, market participants now expected June to be a time where demand would resurface to cover summer season requirements.

"I could expect some upside ahead [towards June]," the second buyer said. But it remained to be seen whether most buyers would knock on the doors of European PET producers for summer material requirements, or if orders will be met via the imports channel, where economics remain healthy. Nevertheless, a sudden swing in temperatures to the warmer side could also lead to a sudden shift in buyers' psychology.

"Summer demand now will mostly be for June, I do not see any pressure on supplies at the moment," the first buyer said. "It all depends on the weather if demand picks up, and it would be interesting to see what happens when it gets warmer."
 
 
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