European prices for polyethylene terephthalate have fallen to their lowest levels since August 2010 according to Platts data, and many sources expect further declines in March.
The falls were driven primarily by import competition and lower feedstock costs, sources said.
Spot prices in Northwest Europe fell to Eur1,092.50/mt FD NWE Wednesday, the lowest price since the end of August 2010, when they were assessed at Eur1,085/mt.
Freely negotiated net contracts were assessed at Eur1,097.50/mt FD NWE, the lowest level since Platts began assessing net NWE PET contracts.
Prices have headed steadily downwards since the end of September last year, when the spot price was at Eur1,262.50/mt and the contract price was at Eur1,252.50/mt, as the PET market entered the low winter season, when demand typically drops.
The fall was exacerbated by pressure from cheap imports, as Asian prices fell to 16-month lows in dollar terms in November while the euro climbed against the dollar, reaching a 26-month high in December.
These trends have continued.
Asian prices have kept falling, and Wednesday were at their lowest levels since early July 2012, and although the euro is down from its December high versus the dollar, it remains well above typical 2012 and 2013 rates.
This has kept buyers open to import opportunities.
"If Europeans do not give the signal that they will go lower in March, imports will come in," said a converter.
European Union imports of PET shot up by over 30% in 2013, according to Eurostat data.
In addition, new capacity in Turkey and Egypt has added to the competition.
Although the Turkish plants are not yet actively marketing to buyers in NWE, sources say that Egyptian producer EIPET is.
EIPET, a 420,000 mt/year venture in Sokhna, Egypt, which is a 70% subsidiary of India's Dhunseri Petrochem & Tea, with 23% and 7% equity participation from Egyptian Petrochemicals Holdings Co (ECHEM) and Engineering for the Petroleum and Process Industries (ENPPI) of Egypt respectively, is planning to serve customers in North Africa, North America and Europe.
The plant started its first 210,000 mt/year line in January and plans to start the second line in around two months, depending on market conditions, a source at the company said.
At this stage, European buyers still need to gain approval for the producer's product, sources said.
"We've been talking to EIPET for over a year now and have tested material from the plant. I can get very favorable terms if I wanted to commit. However, most of our customers would need to trial it first so we are at least six months from validation and final approval," said a converter.
But one of the main drivers in February's Eur40/mt fall in contract prices and Eur35/mt fall in spot prices has been lower raw material costs.
The NWE February contract price for key feedstock paraxylene was fully settled at Eur975/mt FD NWE, representing a Eur92/mt decline from the January ECP, and is the lowest PX ECP since November 2010, according to Platts data.
No settlement has yet been heard for the February ECP for PET's other feedstock monoethylene glycol, but sources expect a decrease given the Eur40/mt fall in the upstream ethylene CP and weak downstream demand.
The Eur92/mt decrease in the February PX CP by itself indicates a Eur52/mt decrease in PET feedstock costs, with the MEG contribution yet to be determined.
PET producers have thus been able to increase margins despite the large fall in prices.
"We had this PX settlement mid-month. It reflects January and February, and it's important that converters recognize it. From a PET producer's point of view, the fact that it came through mid-month leaves no incentive to go lower than imports. We have been able to regain some margin, and so we should," said a PET producer.
Buyers said they want more of February's feedstock fall to be passed on in March, and market participants also expect another, albeit smaller, fall in the PX ECP for March.
