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European virgin PET rises above RPET as virgin PET prices hit 10-year high

Highlights

Virgin PET resin Eur30/mt over RPET

Spot supply expected to remain tight

Northwestern European prices of virgin polyethylene terephthalate moved to premium over recycled PET clear flakes on Nov. 3 for the first time since June 8, as PET prices hit a 10-year high, S&P Global Platts data showed.

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Virgin PET values have been on a rally since mid-August amid an acute material shortage in Europe, coupled with increasing demand from PET resin consumers, who are looking to secure volumes.

S&P Global Platts last assessed PET FD NWE at Eur1,500/mt on Nov. 3, up Eur100/mt from Oct. 27, the highest since April 20, 2011, and at a Eur30/mt premium over Platts Recycled PET clear flake FD NWE assessment.

R-PET clear flakes were assessed at Eur1,470/mt FD NWE, up Eur20/mt from Oct. 27.

Spot availability of PET remains extremely tight, as European producers face a lack of feedstock PTA, which prevents them from operating at full capacity. High freight rates and logistic delays have made it difficult for Europe to import enough PTA and PET from Asia.

Most PET producers were heard already sold out for November, according to sources, with the availability for December deliveries already looking limited.

"It is not possible to get [PET] resin. If you have a contract with some agreed volumes, you can expect to get the lowest [end of] agreed volumes," a converter said.

Demand for PET resin continues to outpace supply and some buyers are hunting to secure any volumes they can.

"Some customers are extremely desperate. Material remains scarce," a trader said.

The supply-side constraints are unlikely to ease anytime soon. A trader said that looking ahead, the market is already tighter for January and February delivery periods.

RPET CONVERSION COSTS JUMP

Bottle bale-to-flake converters have not only been impacted by higher virgin PET resin prices but higher costs of production due partly to the escalation of energy costs.

Aside from a surge in recycling costs, the real concern for converters was not only a rise in material costs but also any potential for panic buying which could see shortages return going forward.

"I see it coming in the first quarter next year, depending on what virgin will do. If virgin continues to climb then this will go up," the converter said.

In addition, any supply constraints could affect recycling commitments recently made by major plastic buyers, sources said. The rise in both virgin and recycled PET price could affect consumption given that some of the FMCGs may have overcommitted

"The Coca Colas ect. will use the minimum. We may even see some stepping back form pledges. They are communicating much high recycling levels than 100% RPET PCR content. There is not enough PCR. To get 100% you have to recover 130% from the market," the converter added.