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UK July PET contract expectation diverges from continent: sources

https://www.chemnet.com   Jul 14,2011 Platts
Expectations for the July polyethylene terephthalate contract are diverging between the UK and the continent, sources said Wednesday.

Northwest European PET sources said they expect their freely negotiated July contracts to settle with a decrease in line with the fall in raw material prices but converters in the UK were expecting a rollover in July at best.

In June, freely negotiated PET contract prices declined by more than Eur100/mt in NWE as significant quantities of imported PET arrived and greater availability of PET feedstocks allowed producers to increase their operating rates.

Because PET producers settled their June contracts at a price that cut into their profit margins, several PET producers said at the end of last month they would target a rollover in prices for July.

However, last week, feedstock paraxylene fully settled for July at Eur1,085/mt ($1,518/mt) FD NWE, a decrease of Eur85/mt from June. Although co-feedstock monoethylene glycol fully settled at Eur1,044/mt FD NWE, an increase of Eur29/mt, pass-through costs to PET producers decreased roughly Eur38/mt this month.

"I will demand exactly the same price decrease as the raw [materials]," one PET converter in NWE said this week. "It will be difficult to get, but I think we will get it."

Another PET converter in NWE said his expectations were that a decrease of more than those for raw materials could be possible this month.

"I think it will be a higher decrease than minus Eur38/mt, maybe even double. I have the feeling that there is quite a lot of material on the market," the converter said.

One PET producer this week said he expected July freely negotiated contracts to move down in line with his contracts linked to raw materials.

He said that although the July price would be lower, it was not because downstream demand was weak.

"This does not represent weakness in the market, but the evolution of raw materials," the producer said.

But in the UK, sources said no decrease in July was a possibility.

One converter said the traders he normally settles his contracts with were offering a rollover because the product they imported to the UK was based on the May and June raw material prices, which were higher than costs in July.

A second converter also said his initial indications about the contract was that in the UK, July would be a rollover. The pound to euro exchange rate was a primary factor he cited as the reason for the rollover.

"The sterling has been very very weak and continues to be weak against the euro. That has...reduced any reduction quite significantly," the converter said.

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