PET bottle chip downstream O/R varies greatly

Recently, with the continuous decline in upstream raw material costs, the market price of PET bottle chip has fallen to near the lowest level of the year, and downstream plants have also shown replenishment actions. However, according to CCFGroup understanding, the current operating conditions of PET downstream market vary greatly. On the one hand, most beverage factories are preparing for the peak season, and their O/R remains high. As the first year opening up after the epidemic, many beverage factories want to achieve high growth both in production and sales, so the demand for PET spot goods from large end-user factories has surged since late April. Since end April, beverage factories have basically maintained the rhythm of replenishing goods every day, consuming up all the domestic sales indicator of some PET bottle chip plants, and some producers even began to consider allocating part of the export order indicator to domestic sales.

On the other hand, the sales peak season for edible oil factories has not yet arrived. It was originally expected to bring a large demand around May Day, but the actual demand did not meet market expectation. Therefore, the operating rate of many oil factories in some regions is merely 50-60%, and O/R in East China is slightly higher, with some reaching more 80% plus. However, based on the expectation of small peak season during the Dragon Boat Festival in June, some oil factories have recently started to purchase raw materials near the low price.

In addition, O/R divergence in the PET sheet market is the largest. Fresh food and daily necessities packaging companies can basically maintain an operating rate of 80% or more, but traditional sheet companies such as electronic tray plants can only maintain an operating rate of 50-60%, and some companies in South China even run at a rate of 30-40%. It is understood that in recent years, some polyester factories have started to produce PET sheets directly using integrated facilities, so their processing costs are much lower than ordinary PET sheet companies who outsource chips and then produce sheets (similar to the difference between melt direct spun and chip spun in the filament industry). The market advantage of integrated plants is significant, so many ordinary PET sheet companies have had their orders squeezed. Some PET sheet companies will choose to use recycled bottle flakes or bright chip to reduce costs, but in fact, the advantage is not obvious, as the quality differs from products produced by 100% virgin PET bottle chip due to the different process. Meanwhile, this will also downgrade their product, and some high-end customers may not choose this method.

Foreign orders attracted earlier due to the different recovery situations at home and abroad have also started to flow out again after the price of PET bottle chip soared in the past two years, which we believe is also one of the reasons why the operating rate of some PET sheet companies has been low for years. Hence, PET sheet plants that have only single product and weak anti-risk capability or those speculative players are to be weeded out. Some PET sheet enterprises that previously shifted production on price account or added new PET production lines have gradually turned back to use PVC recently. 

Therefore, currently, PET downstream operations vary greatly. The demand from beverage factories is still good, and their O/R remains high. The operating rates of edible oil companies vary, but with the expectation of a small peak season during the holidays, their replenishment enthusiasm is also good. However, for small and medium-sized end-user companies, especially PET sheet companies, their replenishment willingness is not strong, and they mostly consume raw materials restocked previously to complete orders, and replenish PET resin on need. Therefore, we boldly predict that this year, the demand for PET from soft drinks and water companies may achieve rapid growth, but the demand from PET sheet companies is unstable and may need to gradually achieve sustainable growth after several rounds of industry reshuffling.