Europe Imposes Tariff on Chinese PET Resin to Mitigate Domestically High Production Costs

In the first week of December 2023, the European Polyethylene Terephthalate (PET) Bottle Resin market found itself grappling with a bearish sentiment primarily fueled by escalating production costs that imposed significant pressure on local PET manufacturers.

The transparent polymer, widely utilized in beverage bottles and packaging, faced intensified competition from more cost-effective foreign imports. In response to these challenges, companies implemented measures such as halting PET and its primary raw material, purified terephthalic acid (PTA) production. Addressing the imbalance, the European Commission swiftly introduced tariffs on PET imports from China, ranging from 6.6% to 24.2%, with a provisional duration of six months for evaluation. This regulatory intervention follows a comprehensive investigation initiated in March, exposing Chinese PET producers benefiting from artificially low costs in energy, petroleum-based raw materials, labour, land, and capital. The imposition of tariffs aims to level the playing field and safeguard the interests of European PET manufacturers amid these economic challenges.

In the current week, the PET market witnessed a scenario marked by an excess supply of PET, in contrast to sluggish demand for PET bottles. This situation prompted producers in the PET supply chain to respond by shutting down capacity. Notably, last month, Indorama Ventures strategically mothballed a purified terephthalic acid (PTA) plant in Portugal, opting to source the raw material externally. This strategic decision aligns with a broader trend, as INEOS indefinitely closed one of its two PTA lines in Geel, Belgium, both offline since 2022. Simultaneously, the European market experienced subdued demand influenced by pervasive global inflationary pressures. Consumers, navigating the challenging economic climate, restrained their purchasing activities, opting for essential and need-based acquisitions. Furthermore, the European Commission approved a joint venture between Rengo Co., Ltd. and Mitsui Chemicals, Inc., both Japanese companies, under the EU Merger Regulation. This venture primarily focuses on manufacturing packaging materials, chemicals, lubricants, and resins for diverse applications.

Shifting to the Asian PET Bottle Resin market, fluctuations characterized the week with narrow price positions leading to a decline. Despite a marginal increase in industry load towards the week's end, the overall supply in the domestic market remained stable. Some companies faced delays in restarting operations, resulting in a decreased supply. However, supplier support for the market remained limited. Raw material prices, including PTA and ethylene glycol, fell during the week, contributing to weak overall support for PET costs. Downstream procurement was constrained to essential needs, and consumption levels entered a gradual off-season decline, weakening negotiation atmospheres. In the context of dual reductions in supply and demand, cargo holders exhibited limited confidence, favouring selling at a discount. Short-term expectations indicate that the PET market may persist in operating in a weak and volatile manner.