Prices for polyethylene terephthalate look set to climb over the coming weeks and months, as producers struggle to achieve acceptable margins while feedstock prices increase.
So far this year, the European spot price assessment has climbed by Eur20/mt ($26/mt), reaching Eur1,285-1,290/mt FD NWE on Wednesday, with prices set to climb further.
Producers had already had some success increasing prices over the course of December, from an assessment of Eur1,250-1,255/mt in the first week of the month.
This came despite falling feedstocks, as the December paraxylene contract price was settled Eur5/mt lower than in November while the monoethylene glycol contract was settled Eur22/mt down, indicating a reduction in PET raw material costs of around Eur11/mt.
The increases were pushed by producers trying to increase their margins, with one producer describing margins in the fourth quarter as "unsustainable."
The small increases were achievable as a result of a reduction in imported products.
Competition from imports drove spot prices to an assessed level of Eur1,230-1,235/mt in mid-November, but such competition became less of an issue as Asian prices increased.
However, not all producers increased prices in December.
"Last month some producers were still going for decreases, which tempered the increases in the market," said a trader.
But the January European contract price for paraxylene was fully settled Tuesday Eur40/mt higher than the December price, while MEG was initially settled Wednesday up Eur20/mt.
The increases in the feedstock contract prices, should the MEG price become a full settlement, indicate an increase in PET raw material costs of Eur30/mt.
This is driving producers to push even more for price increases.
"With raw materials increasing faster than expected, we are pushing for an increase of plus 50 to cover the feedstocks and try to get some margin back because we are still in the red," said one producer.
Some converters that allowed stocks to dwindle to the end of the year now need to purchase PET, and the lack of import competition puts producers in a strong bargaining position.
"At the moment we need to get some stock because I don't expect it to be cheaper in February or March and there are no imports so we think it will go up," said a converter.
But some converters engaged in pre-buying in December and are better prepared.
"Some customers have built some inventory in advance for January, so that they can wait a little bit and see. But at the same time, because of these advanced deals in December the inventories in the hands of the producers are under control. I think it will take some time before the average price for January is defined because both parties, sellers and buyers, are in a relatively comfortable position," said one producer.
Nonetheless, those looking to buy are finding that the market has changed.
"We aren't getting the offers we were getting in December," said one converter.
