A 15-20% increase in the demand for polymer packaging in March and April caused a revival in the market of polyethylene terephthalate (PET), and already in May, Russian producers of raw materials raised prices. After that, many processing companies switched to more affordable Chinese raw materials, and the Russian market for PET pellets was oversaturated.
In the structure of consumption of the Russian market, bottled PET makes up about 94% of the volume of primary PET; fiber, sheet and film PET together account for the remaining 6%. The total capacity for the production of PET in Russia currently stands at 635,000 tons. In 2019, 602,000 tons of primary PET were produced. This is slightly lower than in 2018, due to the shutdown of the Polyef plant.

Interviewed by CREON experts, market participants noted that due to forced self-isolation and rainy May, sales of soft drinks in PET containers fell by more than 25% compared to the same period last year.

At the same time, Russian producers of raw materials, sensing an increase in consumption in March and April, raised spot prices. After that, in May, processors increased purchases of cheaper primary PET from China, which increased output volumes at the end of quarantine. The current situation has led to stocking of warehouses and a surplus in the Russian market.

“Russian producers of raw materials raised prices, and processors began to purchase raw materials in China, so the share of imports in the PET segment is huge in the first five months. By the end of May, Russian manufacturers lowered prices, so that a return to Russian PET will be gradually noticeable. The situation was not very pleasant, because customers are lost this way, and the business did not behave strategically, but with a view to short-term profit, ”says a source in the industry. Indeed, the spot quotes of Russian plants in the first week of June fell from 80,000 rubles. per tonne and approached contract prices, amounting to 72–74,000 rubles. per ton.

Beverage market decline, packaging segment growth

Consumption was most noticeable in the carbonated drinks segment, primarily premium drinks. “People started saving and the situation affected the premium group of drinks. Roughly speaking, children may get their sweet water, but it will already be a cheaper segment, ”a source in the industry shared.

Also, the PET packaging market noted a change in demand in favor of large containers: previously, a 0.33 liter bottle was more popular, but now the trend is shifting towards a bottle with a volume of 1 to 5 liters. But in spite of a significant reduction in demand for bottled PET in May, processors expect recovery in consumption levels by summer – given the hot weather. “We look forward to a revival with the advent of the hot season,” says the expert. “If you evaluate the market by months, then the market is falling, but if you take the period from January to May in total, then 2020 shows an increase of about 10%.”

Experts interviewed by CREON also noted an increase in demand for PET packaging: “We are seeing a return to plastic, which is again becoming a friend of everyone,” says the manufacturer of equipment for PET packaging. So, in March-April, the demand for plastic containers for food packaging rose sharply. However, already in May, after street trading was suspended and restaurants closed, this segment dipped by 75%.

“In general, consumption has changed a lot: the same eat-to-go left as a class, although it developed at a rapid pace, restaurants are closed, people are sitting at home. Sunflower oil in the beginning rose, then fell. 2020 and 2019 there is no point in comparing with each other, they are fundamentally different, ”- said a major manufacturer.

Where is the market moving

Market participants are quite cautious in long-term forecasts. However, new projects are planned in the industry in the field of production, equipment and recycling, new players appear. “Most likely this year will not be so large in terms of investments, but there is a tendency to invest in industry, production and processing. And this is real money, ”says a source in the industry.

To date, the most sought-after segments are pharmaceuticals and food wrap, since March showing growth of about 20% due to explosive demand for personal protective equipment and online delivery.

Also, during the pandemic period, Russian manufacturers increased the production of PET sheets, which are now used in stores, banks, gas stations, and other organizations where it is necessary to prevent physical contacts between people. Thus, the Ecopet company increased its daily output by 4.5% and, according to the Director General Alexander Anikeev, the capacity utilization of the enterprise at the moment is 109%.

In general, experts agree that the packaging market will continue to grow, but its focus will shift towards cheaper and lower margin packaging.

“We continue to believe that capacities for PET pellets and products in Russia should be increased, as demand will recover, and the zeal to legally limit polymer packaging has subsided. Due to the global surplus of raw materials, the import alternative is always available, but Russian pellets, preforms, and especially processed products, are still in demand for market development. Moreover, I hope that the recycling of PET will increase in volume and find demand, ”commented Nikolai Asatiani, CEO of Creon Energy Asia.

Source: Creon Group