Bottled Up frustration For PET In The Face Of COVID-19

Wednesday, July 15th, 2020 | 1382 Views

One of the effects of the coronarvirus pandemic is that consumer behaviour in terms of buying and consuming goods has changed in line with restricted supplies and access to retail sites.  Alongside this, typical trends in on-the-go purchases have evaporated, none more so than in beverage consumption.  PET resin is the most commonly used resin to package bottled water and soft drinks as well as food products, although usage in other areas is also growing due to its superior recyclability.

PET resin demand typically exhibits seasonal patterns. In Q2 as temperatures begin to rise and the European holiday season begins, the demand for PET resin increases as demand for bottled water and soft drink increases with the warm weather. Demand is often weakest in Q1 when temperatures are at their lowest and the demand from the festive period wanes. A European Commission public consultation uncovered that Europeans often feel insecure about the quality of tap water when abroad, hence bottled drinks take precedence over the tap when abroad.

2020 is guaranteed to be a turbulent year for most markets and PET resin is not exempt. Q1 trade flows into Europe are already indicative of the disruption caused by the coronavirus pandemic—exports from Asia into Europe are far below those of 2019. This cannot be solely attributed to logistics and shipping disruption in Asia but also the fact that the price spread over Asian PET resin has continued to reduce over the last 12 months. Although virgin PET resin prices remain at all time lows it does appear that European producers are seeing some positive repercussions as demand returns for domestic production as buyers look to shorten their supply chains, removing a degree of uncertainty in this volatile market.

Lockdowns were widely implemented across Europe in March as the coronavirus pandemic worsened. The initial implication for PET resin was a spike in demand as populations stocked up on food, beverages and household products. PET resin price initially remained afloat against a backdrop of crashing crude oil and plummeting feedstock costs.

By April lockdowns and restrictions remained in place for the majority of Europe and the demand for PET resin had dampened. Populations were restricted and the growth in tourism halted. The price decline in the feedstocks and the weakened downstream demand now filtered into the European PET resin price. Declines in out-of-home purchases are already affecting major brands. Britvic, a British soft drinks producer, saw the out of home channel volume sales in Great Britain decline by -57 percent in April vs 2019. This was partially offset by +12 percent growth in the at home channel.

With tourism being significantly reduced since mid-March it is almost inevitable that there will be no ‘normal’ holiday season in 2020.  PET resin demand is expected to be reduced year on year in tourist heavy areas in 2020.

By Susan Mair, Petrochemical Analyst ICIS


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