Polyester products whole line in loss, why PET bottle chip still lucrative ?

Recently, crude oil futures continuously hit the all-time high, and the benefits of major polyester products have been significantly compressed after a sharp rise in raw material costs, and even losses have occurred. However, among the many polyester products, the processing spread of PET bottle chip is still good. So what are the reasons for the good benefits of PET bottle chip?

Basis trading mode like futures

First of all, the sales model of PET bottle chip is slightly different from that of other polyester products. Compared with PFY and PET fiber chip, PET bottle chip is mostly sold in advance, and customers basically only need to pay 10% deposit in advance. Due to the large downstream consumption volume, bottle chip factories typically need to take in orders 1-2 months in advance in order to better arrange the delivery rhythm. In this way, in fact, both buyers and sellers can judge whether it is a buying point or a selling point based on the raw material futures trend. At the same time, some manufacturer has also tried out basis trading in the past two years, that is, a monthly premium or discount on the basis of the benchmark price. The suppliers lock the cost of raw materials as they sell, and the buyers can also prepare the goods in advance according to his own judgment on the market. Therefore, as long as the PET bottle chip producer is not too aggressive, breakeven processing spread can at least be guaranteed. In addition, after determining the quantity and price in the early stage, it is easier for the bottle chip manufacturer to adjust its raw material purchasing rhythm and bottle chip sales strategy in the later stage.

So far, most of the mainstream bottle chip manufacturers are already selling orders for May to August in China, and only some of them are still selling spot orders for March to April, while overseas exports are basically talking about the shipping date from May to July. Therefore, the recent rise in crude oil may be beneficial to bottle chip factories to take in orders over a period of time. In the long run, high costs are certainly not a good thing for the industry.

Export sales proportion rate high

Secondly, the export proportion of PET bottle chip is increasing year by year, and the profit in most of the time is better than that of domestic sales. Except for a special year such as 2020, from 2018 to 2021, the export sales proportion of PET bottle chip factories is basically 35% or more, and even nearly 50% in some months, greatly reducing the pressure on domestic sales. Since September 2021, the proportion of export orders has basically remained at 40-50%, and some factory can even reach more than 80% in some months. According to CCFGroup understanding, at present, the export orders to be delivered maintains around 1.5 million tons, which means, which means that the monthly shipment volume since Mar in the first half 2022 can be maintained at more than 350000 tons if there is no shipping delay or change in shipping schedule.

Trader activeness high

In addition, traders in the PET bottle chip industry are active. Traders in the daily trading of PET bottle chip are equivalent to the delivery warehouse of the futures market, acting as a reservoir, and the trading volume accounts for about 1/3 of the market. So far as we know, the current total inventory is basically around 1.1-1.2 million tons. Apart from the port inventory of 300-400kt to be delivered for export, and domestic sales to be delivered of nearly 400000 tons, traders only have about 400-450kt PET resin in hand, which are still concentrated within several large traders. The traded price basically follows the factory level or at marginal discounts to factor level. Therefore, for small and medium-sized customers and traders in the market, it’s difficult to build stock or cover short recently, which also means that although the supply of goods in the market is relatively sufficient, the sellers who actually have goods and sell at a suitable price are not very easy to find, which indirectly lays the foundation for PET bottle chip factories to maintain the current high processing spread.