- April 24, 2012
BOLINGBOOK, IL | Following the absorption over the past two months of price increases for PET film, John Felinski, president of Filmquest Group, explains, “Since we purchase a percentage of production capacity and do not buy in the spot market. . . we will increase our prices by $0.10/lb, effective May 1, 2012.” He adds this action “is consistent with the market.”
Felinski provides a detailed explanation for the need to raise prices, clarifying the complexity of market conditions and what to expect going forward in a separate announcement that customers can request by e-mailing firstname.lastname@example.org.
Briefly, Felinski observes, while overall demand for flexible packaging film has reportedly increased, it is more accurate to say that “the excess film accumulated during 2011 in the entire supply chain is almost exhausted. When that happens,” Felinski says, “we will naturally return to more ‘normal’ lead times, and because of that, there will be less surplus availability in the spot market.”
Felinski says he has advised his program customers for some time that the market dynamic is changing as a result of underlying drivers. While those selling into the spot market have promoted that surplus film is plentiful, the price for PET film has actually been artificially low for almost a year. He elaborates, “With capacity matching true demand, we would anticipate some stability rather than continued volatility in the market through the balance of this year. When you consider the cost of PET resin--which is up--the cost to produce the film, along with transportation cost--which is also up--you see that the market price for PET film has been well below the level required for most producers to break even.
“Companies investing up to $80 million in new capacity must see a return on investment and it is reasonable to expect that as soon as the purported ‘demand’ increases, prices will track up past break--even to a point of reasonable profit. As long as the balance between supply and demand remains intact,” Felinski rationalizes, “the price should remain stable and at a higher, but reasonable level.”
For a complete analysis, offered in Film IQ Market Update, of market conditions and underlying drivers or to discuss the market in more detail, Felinski offers his availability by contacting him at 630-226-9800.