PET bottle chip industry run sharply down 10% due to the delay of logistics

Recently, due to the spread of the epidemic, many major provinces and cities have closed highways and set up checkpoints, as a result, the previously not abundant logistics delivery time has been lengthened again. 

So far as we know, the logistics in most parts of East China is seriously restricted and ports are congested, it is difficult for raw materials to enter, and difficult for products to be shipped out as well. Recently, the inventory of bottle factory is obviously rising. As of Apr 8, the average stock level of PET bottle chip factory has risen to near 11 days, partly lower within one week and higher at 15-20 days. The highs are basically found in factories based in E. China. In addition, Anyang Chemical has arranged annual maintenance, and the spot liquidity is quite difficult, which can’t guarantee the consumption of intermediate sectors and end-user customers. This phenomenon can also be seen from the fact that the spot price is still firm at above 8000yuan/mt.

Due to the disruption of logistics, only after one Tomb Sweeping Day holiday, the average O/R of PET bottle chip industry has dropped by 10%. O/R of some factory has declined from full rate to the current 20-30%. As of April 11, the average industry run has fallen to 80.5%, compared with the previous peak of 89.9%. Based on design capacity of 11.71 million tons, the figure has dropped from 100.1% to 89.6%.

Note: based on design capacity of 11.71 million tons

Following this trend, April production is likely to fall from the original level of 950-960kt to 900kt. According to the historical data of domestic and export sales as well as assessment of to be delivered orders, Apr delivery volume is basically more than one million tons. Even with China Resources Zhuhai 500000-tonne line restarting, total PET bottle chip stock level may drop to slightly below 800kt end Apr, down more than 400kt from the end of 2021.

Although PET bottle chip export orders are tolerable, with many shipping dates talked to June to July, taking into account the restart of some plants and release of new lines after the epidemic, domestic supply is still expected to be relatively loose in the future. PET resin stock level may likely to modestly pile up in the second quarter.

In addition to short-term damage to the supply side, downstream demand has also been significantly suppressed due to the epidemic. According to CCFGroup statistics, the overall running rate of major beverage factories averages at around 60-70% this week. Affected by the local epidemic, some beverage factories have been shut down. At present, only about half of the beverage factories are operating at full rate. O/R of PET sheet factories has also been affected to a certain extent, falling to around 50-60% in E. China, slightly lower at merely 30% in some areas, and 50-60% in S. China. In terms of edible oil plants, the average industry run is around 50%, and keeps declining in some areas affected by the epidemic.

Generally speaking, at present, PET bottle chip supply and demand are both in shrinkage. Talking price is a bit stagnated. However, because the epidemic has a great impact on logistics, it’s not ruled out that bottle chip factories may continue to cut down production at later stage, and beverage factories that are on the eve of the peak sales season may come out one after another to replenish PET stock in the near future to prevent sudden outages. And if there is no turning point over the epidemic by late May, PET sheet and edible oil companies under logistics congestion may not be less entangled than the current beverage enterprises regarding raw material procurement. Therefore, the short-term benefit of the epidemic to the industry is that it reduces the market circulation and slows down the pace of price decline, but at the same time, it may have a greater adverse impact on the industry: the pickup difficulty and the permanent disappearance of some demand.