APLA ’23: Seasonality and changes in consumption habits influencing PET demand and market share in Brazil

SAO PAULO (ICIS)–Modern living continues to be largely dependent on plastic bottles, especially those made of polyethylene terephthalate (PET). Beverages such as juices, soft drinks and water remain responsible for the major consumption of PET bottles worldwide.

The year-round consumption of PET bottles is not consistent, though, since seasonality influences demand for PET resin along with a range of factors that impact production, circulation and use heading into this year’s annual meeting of the Latin American Petrochemical an Chemical Association (APLA).

It goes without saying that the summer is one of the busiest seasons for PET bottle sales. This time of year, people like to stay hydrated, so it is not surprising that bottled water and other drinks are in high demand. Furthermore, having drinks that are simple to package is even more crucial as outdoor activities like picnics and vacations become more common.

PET demand in Latin America continues to be strongly influenced by the weather, with Brazil facing positive sales in Q3 and Q4, with market sentiment that consumption should be increased by March 2024.

High temperatures and less rainy weather continue to generate confidence in producers, buyers, traders and distributors in the region.

The Latin American market continues to have a wide range of PET resin options available; however, recent problems related to the availability of PTA in Brazil have caused local companies to rework their strategies, often seeking for feedstock and resin in other countries.

Demand in Brazil is stable, with the market witnessing PET sales above expectations in Q4.

PTA Petroquimica Suape announced that, as a result of scheduled maintenance, PTA production will be suspended for 30 days, starting on 06 November.

A market participant said he saw an increase in PET sales from Vietnam and Malaysia to Brazil in Q4, which may be related to the diversification of suppliers at this time of reduced PTA capacity rates and planned maintenance in Brazil.

According to the ICIS Asia-Pacific report, Chinese PET bottle manufacturers have further lowered their operating rates to control inventory levels. In addition, a new plant by a Chinese manufacturer is scheduled to open in November.

Moreover, producers outside of China in east Asia have continued to operate at conservative rates in the face of declining margins.

The ICIS Supply and Demand database indicates that Brazil’s PET imports decreased in Q3 and reached a record low of 3,912 tonnes in September.

Higher import tariffs and unpredictability in the economy continue to have an impact on the volumes of PET exported from Asia to Latin America in 2023.

Asia continues to focus on the international market to balance supply and demand, with plentiful material available, with major cargo going into the west coast of South America.

Even though prices in Mexico and Brazil have some import tariffs against Chinese resin, Asia offers continue to pressure prices in Latin America in the short term.

By the end of October, prices for polyethylene terephthalate (PET) in Latin America remained stable. The market is still experiencing a reduction in margins from global feedstock prices, especially for paraxylene (PX).

One of the most important branches of the processing sector is the beverage industry. In absolute numbers, the processing industry employs tens of thousands of workers across Brazil, despite the fact that it is not one of the most labour-intensive industries.

Because the products in the processing sector need water as a raw material, the production of the industry is spread across many regions.

The non-alcoholic beverage sales market in Brazil has been steadily decreasing over the last few years; however, soft drinks still represent a substantial share of the market, representing 56.6% (IBGE, 2022a, 2022b) of total sales (in volume).

One of the main reasons for this decrease is that consumers are increasingly seeking out beverages with lower sugar content, thus increasing their health benefits.

Healthy substitutes are gradually taking the place of non-alcoholic beverages, which have historically been the domain of beverages. The market for non-carbonated drinks is becoming more competitive as a result of the decline in soft drink consumption.

Producers of coconut water, juice, functional beverages and teas are vying for market share in Brazil.

The market anticipates that the competition for supremacy in the soft drink market will increasingly extend beyond soft drinks and encompass other categories such as flavored water, fruit juices, teas and energy drinks.

Healthy and wellness-related New Year’s resolutions are very popular at the beginning of the year. The addition of water or other healthy drinks in PET bottles to their workout routine is a popular preference. The first few months of the new year are when this is most prevalent.

According to research conducted by the Escritório Técnico de Estudos Econômicos do Nordeste (ETENE), the production of non-alcoholic beverages is distributed widely across regions because of the nature of these products, which primarily use water as an input.

The graphic below shows that production units exist in every state in Brazil, and it is evident that there is an emphasis on production in the most densely populated states at the regional level.

Following the COVID-19 pandemic, a number of new trends for the industry’s non-alcoholic beverages arose and were further strengthened by the macroeconomic environment factors that currently rule the worldwide market.

These factors include rising unit prices in global non-alcoholic beverage classifications, which are driven by notable variations in the price/packaging mix and a reduction in substantial brand discounts by retailers as a result of inflation, along with efficient brands that continue to show strong expansion.

This has been led by energy drinks and sports drinks, but also new functional need states that are establishing itself and more sustainable practices that have been adopted in the non-alcoholic beverage industry globally, particularly in the area of plastic packaging waste and reprocessing.

Undoubtedly, seasonal variations in the demand for PET bottles can result in excess plastic waste and increased energy consumption, raising concerns about the sustainability of PET and its impact on the environment.

Nevertheless, efforts have been made by the market to shift from virgin resin to recyclable PET, with the goal of balancing PET’s sustainability with its convenience, as consumers strive for a better quality of living and demand brands to have a responsible mindset.

The 43rd APLA annual meeting takes place 11-14 November in Sao Paulo, Brazil.

Focus article by Daniel Lopes