High costs weigh on European PET firms

High production costs have put European makers of polyethylene terephthalate (PET), the clear polymer used in beverage bottles and other packaging, under pressure from cheaper foreign imports. Companies have responded by shutting down production of PET and its main raw material, purified terephthalic acid (PTA). Coming to their aid, the European Commission is imposing tariffs on PET from China.

The duties range from 6.6% to 24.2%, depending on the producer, and will be in place for up to 6 months while the commission weighs feedback. They result from an investigation the Commission launched in March. The probe finds that Chinese PET producers enjoy artificially low costs for energy, petroleum-based raw materials, labor, land, and capital.

“In sum, the Chinese economic model is based on certain basic axioms, which provide for and encourage manifold government interventions. Such substantial government interventions are at odds with the free play of market forces, resulting in distorting the effective allocation of resources in line with market principles,” the Commission says in a report.

The report notes that imports from China have spiked over the past year and warns that Chinese output of PET has been sharply increasing. Meanwhile, European PET producers have been racking up unsustainable financial losses, the Commission says.

Producers in the PET supply chain are shutting down capacity. Last month, Indorama Ventures said it would mothball a PTA plant in Portugal, opting to buy the raw material instead. Similarly, Ineos has decided to indefinitely close one of two PTA lines in Geel, Belgium. Both have been off line since 2022.

According to published reports, JBF Global Europe is idling a PET line in Geel that is adjacent to the Ineos complex. The large PET plant is relatively new, opening in 2014.

“The EU’s imposition of provisional anti-dumping duties on Chinese PET resin is a step in the right direction, but European industry urgently needs more help,” says Steve Dossett, CEO of Ineos Aromatics, in the firm’s closure announcement.

Martin Wiesweg, executive director of polymers for Europe, the Middle East, and Africa at the consulting firm Chemical Market Analytics, says PET producers’ problems originate in Europe. The war between Russia and Ukraine has pushed up European energy prices and raised the cost of making PET in the region. The cash cost differential between Europe and Asia has increased from about $150 per metric ton (t) to peak at $350, he says.

As a result, Europe has become an attractive market for foreign producers—from China and elsewhere. The region, Wiesweg says, averaged 800,000 t of annual imports in recent years. This year, that figure might hit 1.4 million t. Europe consumes about 4 million t of PET per year, he says.

“The European polyester industry is in a, I would say, risky position,” he says. “There’s no imminent change in the market dynamics, so cost will stay elevated versus Asia.