PET producers hike prices with summer demand
By Staff -- Purchasing, 9/2/1999
In light of price increases for polyvinyl chloride, polyethylene, and polypropylene, makers of polyethylene terephthalate (PET) announced price hikes of 5¢-6¢/lb to go into effect in July. PET producers blame rising feedstock costs for the increase and say they must strengthen margins to avoid losing profitability.Analysts believe that at least some of the price hike is likely to go through, due to increased seasonal demand for PET from soft-drink bottlers. Other factors, such as tightened ethylene supplies from unplanned outages, have also played a role in the price-increase proposal.
According to a chemicals industry analyst at New York, N.Y. -based Donaldson, Lufkin & Jenrette, "If [producers] don't get a price increase now, it's not likely they will get one this year," he says. "Once the summer season comes to a close, demand for PET slows down, and there's already an oversupply of material," he says.
"Producers feel fairly confident that their latest increase proposal will go through, but how much they actually get will depend on a couple of factors," he says. "First, if the weather is hot, more people will drink more beverages and demand for PET will continue to rise," the analyst says. "The rest depends on how much of a price increase PET buyers are willing to bear," he says.
Purchasing's forecast: PET buyers should look for prices to rise by as much as 2¢/lb for contracts, then stabilize at about 48¢/lb through the end of the year.
Current contract estimates for PET, collected quarterly by Purchasing, place prices at about 46¢/lb on average for bottle-grade material during the second quarter. Prices are forecast to increase by about 2¢/lb on average during the third quarter, before stabilizing at about 48¢/lb through the end of the year.
The three main feedstocks for PET are ethylene, ethylene glycol, and mixed xylenes. While ethylene supply has been tight and contract prices are up about 3¢/lb on average since January, ethylene glycol contracts have decreased, according to Purchasing's monthly survey of chemical buyers. Industrial-grade ethylene glycol contracts averaged 19¢/lb in June, which is down 1¢/lb from its 20¢/lb average in January.
Contract prices for mixed xylenes averaged 75¢/lb in June, up from 68¢/lb in May. Similarly, mixed xylenes spot tags increased in June to 92¢/lb from the May average of 87¢/lb, according to data from Purchasing's monthly survey of chemical buyers.
In supply news, KoSa, Houston, Texas--a result of the December, 1998 merger of Koch Industries, Inc., imasab S.A. de C.V. of Mexico, and Trevira, formerly the polyester business of Hoechst AG, Frankfurt, Germany--plans to bring 150 million lb/yr in new capacity on line at its polyester complex located in Toluca, Mexico. The expansion is scheduled for completion in the first quarter of the year, 2000.
Also, Wellman Inc., based in Charlotte, NC, brought 235 million lb/yr of PET capacity on line this year at its Pearl River, Miss., production facility. The company plans another 235-million lb/yr line expansion to be completed during the third quarter, 1999.
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