Asian competition and weak demand are driving this trend
Polybutylene terephthalate (PBT) prices in Europe are €60/mt lower in Q2. The lower demand is driving the downward trend, especially from the automotive sector. But very competitive imports are also placing pressure on European prices. There is talk that delivered prices from Asia are currently offered at around €1,000/mt. However, this level is extremely competitive and far away from current market prices in Europe. Besides, not all Asian sellers are offering such low prices in Europe. And most remain well above this level for now.
Very weak demand
Demand is very weak and is the main reason why prices are falling. The virus pandemic continues to keep demand subdued from many downstream segments. But auto is suffering the most. The extreme slump in demand for autos cannot be offset by other segments. In some countries car sales are down more than 90%. And even if activity increases, prices are still going down as sellers are fighting to fulfil the extra demand.
While auto sales are indeed very low, the virus fallout is impacting other market segments. Electrical and electronics is also another important segment that is suffering because of the virus. Construction is the same and industrial is even worse. Even as activity gradually picks up there will be some time before this translates to higher demand for PBT. This is because inventories along the value chain are full, increased because of uncertainty and to keep operations going during a period of extreme low activity.
Further losses in Q3
The low demand remains in place since Q1 when prices registered decreases of €100/mt Q4 2019. And since demand is sill low in June, prices could decrease again in Q3. But as activity increases some sectors like construction will have a backlog of orders to complete. And this could help ease any further losses.
What is more, the weak demand looks like it is narrowing the price gap between Asian imports and domestic prices. For some time Asian imports have been substantially below domestic prices, with buyers fighting hard to lower domestic prices. But the current events could finally help them achieve this.