PET bottle chip processing spread may keep lucrative until Aug – ChinaTexnet.com
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PET bottle chip processing spread may keep lucrative until Aug

2022-06-24 08:11:17 CCFGroup

Recently, crude oil shows a strong tone, and PX is undoubtedly a star product. PX CFR China price has risen by a total of 150USD in just two working days, causing PTA futures to rise to uplimit after the Dragon Boat Festival holiday. Market price of PET bottle chip has also breached above intra-year high. As of Jun 8, water bottle chip price has hiked to 9700-9800yuan/mt by cash EXW, for Jun delivery. Q3 orders was at modest discounts, but discussion level for Sep goods also climbed to 9650-9750yuan/mt, up 650-900yuan/mt from pre-Dragon Boat Festival holiday, which is 1850-2100yuan/mt from H1 2022 low.

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As one of the packaging materials, PET price rose sharply, can downstream plants follow up? In fact, since the silent management in Shanghai in April, China end-user demand has been greatly suppressed, and some PET packaging enterprises were almost faced with production suspension due to logistics congestion or blockage. Recently, PET bottle chip prices continuously rose, but many PET sheet enterprises did not receive any high-priced orders to make up for the loss from raw material end. Most orders they get do not exceed 10,000yuan/mt, and the processing fee is less than 1000yuan/mt, resulting in a serious loss. Therefore, the O/R of sheet enterprises is also gradually decreasing, and some sheet enterprises in East China have cut down O/R to 50%.

 

China PET bottle chip domestic demand reduced 3-4% in Jan-May 2022, compared with the same period in 2021. Among which, PET sheet and other packaging demand shrank 13-14% YOY, edible oil demand dropped 4% YOY, and only soft drink demand grew 2% on year. Of these, the fastest year-on-year decline in demand was mainly in April and May, with domestic demand falling by 15.5% and 6%, respectively. The situation is expected to improve in June. However, considering that the actual survival situation of most small and medium-sized enterprises has been pretty miserable, it is unlikely to see an immediate recovery in the short term, although the recent national favorable policies will have a certain effect in the long run. It is expected that this part of demand may gradually return to normal around late June to July. But for plastic packaging companies that have been forced to stop or declare bankruptcy before, the demand loss may be permanent. So sheet demand over bottle chip is expected to drop nearly 20%

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The outbreak of domestic demand for PET bottle chips has actually gone downhill after the glory of the previous two years. There are two things that still confuses us so far: the first is that the actual spot circulation in the market is very tight, so where are the materials going? The reality is that on the one hand, factory salesmen have to work hard to help customers arrange goods, on the other hand, large downstream factories are looking for goods in panic.

 

In fact, due to the delivery delays of a large number of export orders and domestic contract orders caused by epidemic control, PET bottle chip factories have owed a lot of orders, while some factories have even taken in orders three months in advance. So recently, in the choice between keeping the pre-locked order profit or leaving part of the inventory for spot sales, most factories choose to speed up the delivery of previous sales. At the same time, if there are downstream rigid demand customers who can accept high pricing, they can also make a certain profit. For traders, as far as we know, most traders do not hold many Jul contracts, so the continuous price rise has actually caught many market participants by surprise. And the short orders they received in the early stage are in urgent need of filling positions, otherwise the loss is likely to continue to expand. However, considering that the market is still in a confused state, we expect the intensive replenishment to occur after mid-June.

 

The second confusing thing is that what is the support that can maintain PET bottle chip a good processing range for a long time? In fact, the high profit both in and abroad is mainly due to the rising proportion of exports. In the early stage, the export orders of some bottle chip factories can account for more than 80% of the total sales. The export price was once 400-600yuan/ton higher than that of RMB price. On the other hand, the continuous rise of upstream raw material costs has brought about the concentrated replenishment of downstream large factories, which indirectly helped PET bottle chip factories to control their inventory at a low level for a long time. As the world is currently trapped in inflation, market participants mostly prefer to buy early, so the restocking activity was active when prices were low previously. Therefore, even under epidemic control, except for some serious areas, the O/R of large factories is still relatively high, and the demand for PET is also relatively stable. But the recent price increase has indeed stopped downstream customers from buying. There is no tender news heard after the Dragon Boat Festival holiday.

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Before Aug, PET resin supply may keep a bit tight, but upstream feedstock side is hard to judge for the time being, particularly PX, which has increased by dozens of US dollars for several days in a row. It is not known to what extent it can rise in the future. However, it is certain that with the launch of the new capacity and the O/R lifting of old units in the second half of the year, the tight supply will gradually be reversed, and the high processing spread may see a turning point by then.

 

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