PET bottle chip spot supply tightens with spot/forward price spread widening to 1000yuan/mt

Recently, several large plants announced to cut back production, and export delivery is a bit intensive in Jul-Aug, hence the price spread between near-term and forward goods widens further. As of Jul 12, the highest price of water bottle chip is 9100yuan/ton for Jul delivery, and the lowest price for Sep goods is 8100yuan/ton. The price spread has reached 1000yuan/mt. In this regard, market participants have to admit that the current continuous decline in raw material futures may not exert much negative impact on PET spot trading.

In fact, the different views on near-term and forward goods mainly come from two reasons: 1. Export delivery is intensive in July-August, and the market supply is traditionally tight. In fact, more than usual, due to serious delays in delivery of early export orders, many orders that should be shipped in March-April did not arrive the port until June-July, and subsequent orders thus were postponed one by one. 2. After September, there is new capacity expected to come online, and so far, large downstream plants procurement for the fourth quarter is not sufficient, which temporarily doesn’t render support to the market. Therefore, with raw material futures declining continuously, PET price for Sep and afterward delivery has dropped further. The replenishment of major traders is also basically up to August, and not much purchase September goods.

Based on spot purchasing prices, PTA spot price is at 6400-6550yuan/mt, and MEG spot value is at 4210-4380yuan/mt, which put the feedstock cost at 6900-7100yuan/mt. PET processing spread is calculated at 2000-2100yuan/mt, hitting nearly 2-year high, which is merely slightly lower than the 2018 high when PET value skyrocketed. For Sep goods, if we calculate on feedstock futures’ closing price, the processing spread could basically reach 1600-1700yuan/mt, quite lucrative.

However, this situation is actually more obvious in East China and North China, where it is difficult to obtain goods. In South China, due to the continuous rain and cool weather this year, the O/R of local non-beverage factories has not been too high after the early closure. For example, a few days ago, spot goods in East China could be as high as 9000yuan/mt, while the spot prices by traders in South China was merely 8500-8700yuan/mt, whose price spread reaches 500-600yuan/mt. Considering the freight around 200-300yuan/mt, some traders began to resell some of their South China sources to East China.