Film Prices: PET Price Panic & The Dog That Hasn’t Barked

Posted on 04 Jun 2018

PET (Polyester)

Supply side disruption to the availability of base material for PET has led to shortages of some film grades and panic buying across Europe.

The problems originated when BP announced “Force Majeure” at their Belgian PTA plant, followed by a similar announcement by J.B.F again at their Belgian plant. Meanwhile Novapet in Spain has had to reduce output due to “technical problems”.

As a consequence not only have prices of PET increased by over 20% in little more than 6 weeks, with more increases forecast, there is a shortage of supply with BP setting allocation levels as low as 20%.  Whilst the main impact of these price increases will be primarily felt on “Rigids” such as trays and bottles, PET is an essential part of many laminated film structures due to its heat resistance, high tensile strength and high gloss finish.

Whilst the current crisis may be short lived, prices for PET are close to their all-time high reached in 2013.  As a consequence it is unlikely that prices will fall back to their previous level anytime soon.

The Dog That Hasn’t Barked

Readers of Sherlock Holmes stories will be aware of the significance of things that don’t happen. As well as those that do.

Right now there is something of a mystery in the behaviour of film prices.  History tells us that over time film prices will generally move in line with the Oil Price.  This relationship is occasionally disrupted by plant outages i.e. restrictions in polymer supply by the polymer manufacturers, when oil availability increases pressure on their margins.

However, in June 2017 oil was just $43 per barrel.  Now one year later, oil prices are some 50% higher!

In these circumstances the current stability of film prices is somewhat difficult to understand.  Oil has risen in price some 20% since December 2017 and is currently around $70 a barrel. Whilst sterling has been reasonably stable against both the Dollar and the Euro, in the past an increase of this magnitude in oil prices would have seen increase prices from the polymer suppliers. 

Despite the increased output from fracking by the USA producers, current political events in both Venezuela and Iran suggest that the oil supply situation will not get better any time soon, thus normally polymer prices could be anticipated to increase in the not too distant future.

The major difference this time may be the extra capacity which has come on stream of both polymer and film manufacture in the last 12-18 months.  Polymer volumes from the Middle East in particular have increased significantly at the same time as demand for Polymer from the USA has declined, thus reducing USA polymer imports from the Middle East.

Meanwhile an estimated 200,000 tonne of additional film manufacturing capacity has been commissioned between Europe and Turkey, thus for the first time for many years, there is an over-supply situation. As a consequence, we should be looking forward, at the very least, to purchasing our film supplies in a relatively competitive market.  Indeed, unless there is a significant escalation in the Middle East political situation, there may even be room for film prices to soften. We shall see.

We certainly don’t see any need to hold large film stocks at the moment, particularly as July and August are periods of lower demand.  As a consequence, in our opinion, film availability and price should be stable, at least, for the rest of this year.  Once again, we shall see.

As ever any views you have on the points raised would be welcome. Meanwhile why not join me on LinkedIn for more regular updates.