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How long can PET bottle chip market sustain low stock and high O/R

2022-08-16 08:36:28 CCFGroup

Since Jul, PET bottle chip factory delivery has become increasingly tight, and the average factory inventory is now less than a week. Under supply shortage, the average operating rate of PET bottle chip industry rose to 103.5%, hitting record high, and plants sustained this high run. Can the factories continue to operate at such a high rate in Aug-Sep? Will PET total inventories drop again?

 

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First, from the point of view of orders, sales pressure of several major bottle chip factories in the third quarter is not big, and orders to be delivered are very sufficient, but delivery is a headache. Therefore, factories may not take the initiative to arrange maintenance before the end of September, and the maintenance plans may be postponed to the end of the year, from which we can infer that in the absence of policy or other external factors, the high O/R of the PET bottle chip plants is likely to continue until the eve of the fourth quarter.

 

At present, most factories have sold out August goods, and only few is available for sale, and more than half of Sep goods have been sold out. In terms of export, major bottle chip manufacturers have shifted to October goods, and some factories can still sell September materials, but the quantity is not much left. Some factory is reported to have no supply of goods for sale in the second half of the year. Because some export orders were delayed for a month due to the epidemic, and some spot goods were repeatedly oversold during this period, under the influence of intensive delivery in Jul-Aug, market supply tightened further. Traders who had been shorting all the way in the early days were heard have some disputes due to the implementation of shipments.

 

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Secondly, from the demand side, the extreme high temperature lasted for a long time from July to August, and the demand for beverages increased significantly. Many water enterprises have temporarily replenished spot goods, indicating that the actual demand has exceeded the original budget, and the operating rate remains high. Since PET price is high, and end-user players don't accept such high rates, many PET sheet plants have to purchase cheaper bright chip or recycled materials to reduce costs. This part of demand has been shrinking since March this year. However, as the demand for beverage and drinking water packaging accounts for the majority of the market, and there is a concentrated delivery period in summer, even if the demand for non-beverage packaging has decreased, the tightness in delivery has not improved significantly.

 

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PET bottle chip destocking process may come to an end around end-Aug-Sep, as non-beverage demand is slack, which has declined significantly compared with the same period in the previous two years. Although export delivery in the third quarter showed a relatively eye-catching performance in the early stage, according to current understanding, the recent negotiations on orders in the fourth quarter have weakened, and the transaction has not been as positive as in the previous period. Therefore, under the expectation of the domestic off-season and export shipments shrinking, inventory’s turning point may occur at the end of September and the beginning of October.

 

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Export is the main reason why PET bottle chip has been in an outstanding position for a long time. Since the epidemic, due to rising overseas energy costs, skyrocketing sea freight, raw material supply problems, plant failures and many other factors, PET resin supply and demand has been imbalanced around the world. In the past two or three years, European and American customers have significantly increased their purchases in Asia. At present, the global PET bottle chip market has formed an extreme supply and demand pattern, that is, as a PET supplier, the importance of Asia is becoming more and more obvious, while Europe and the United States have to increase imports to make up for the domestic gap in the context of high costs and supply reduction. This can be seen from the recent expansion of China's export surplus, while the trade deficit of many developed countries can also be seen.

 

Overall, the performance of the PET bottle chip industry this year is relatively outstanding, profit and factory orders are both the best among the past years. In the third quarter, under the support of good sales and intensive delivery, PET resin market is of big chance to retain low stock and high O/R. At the same time, it should also be noted that under the influence of high pricing and homogenization competition, the domestic non-beverage demand for PET has obviously weakened, especially the procurement choice of small and medium-sized customers, which began to go low-end. This is not a positive signal, and is worthy of later attention.

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