PET producers blame poor weather for slump

European polyethylene terephthalate (PET) producers have again been left cursing the miserable weather as the peak summer season looks set to fall well below expectations. PET producers rely on the warmer months for higher bottle sales.

The market has endured an ‘awful few months’ with falling prices, weak demand and shrinking margins taking their toll. Sales of PET bottle resin have been extremely disappointing amid difficult trading conditions.

Sellers however, say they remain ‘mildly optimistic’ that business will soon pick up if the weather improves. ‘We need good weather for the next two to three months to give us a chance of recovering a little bit of position,’ says one seller. ‘But if we continue like this, it’s going to be a disastrous year.’

Several producers have already taken preventative measures to restrict stock building, and have signalled their intentions to cut back production. Observers note that even plants that have only recently come onstream are being forced to run at reduced rates.

‘We’ll definitely be making use of the weak market conditions to do some maintenance,’ says another supplier. ‘This would normally have been scheduled at the beginning of the fourth quarter but we’ll be idling some capacity in the next few weeks.’

The lower costs of key feedstocks, mono-ethylene glycol and purified terephthalic acid, have seen PET pricing and demand weaken considerably during the second quarter. PET values are currently reported at low €1100s/tonne levels – down from high €1200s/tonne only a few months ago. June contracts have not yet been finalised but numbers are expected to drop by around €50-70/tonne.

‘Certainly, margins are under a lot of pressure and are anything but satisfactory at the moment,’ says one producer. ‘As soon as the industry gets the opportunity to get some degree of recovery in margins, it will desperately try to do so. There’s nobody out there who is anywhere close to reasonable margin levels.’