Why PET bottle chip plants operating rate continuously high?

Since July, PET bottle chip price has been relatively stable, and processing spread was constantly low. PET bottle chip plants have adjusted down O/R, but sporadic producer still maintained O/R high, why is this the case?

Firstly, most of the new capacity for PET bottle chip was launched in the late second quarter of this year, and the noticeable reduction in processing spread mainly occurred in July and onwards. On one hand, PET bottle chip factories shipments have concentrated during the summer, and orders are relatively sufficient for the time being. Apart from a few factories with high inventories, most PET bottle chip factories have low inventory levels, and there have even been instances of tight spot availability in some regions. On the other hand, downstream procurement has slowed down temporarily, but it doesn't mean that some major drink manufacturers won't replenish their stocks during the peak season of beverage sales. In particular, there have been more instances where purchases exceeded budget plans. Additionally, due to having signed many contracts earlier in the year, most PET bottle chip factories have shifted their inventory pressures to the trading sector. So although overall inventories have been climbing, the inventory and sales pressure of PET bottle chip factories haven't reached the market's expected levels.

Secondly, even though the profitability of PET bottle chip factories has continued to shrink, most large-scale orders were locked in when raw materials prices were low in previous period. During the period of high raw material cost, the amount of orders received by PET bottle chip factories hasn't shown a significant increase. Starting from the second quarter, the overall tone of the polyester industry chain has been largely determined by the high prices of PX. Raw material costs determine the upper and lower limits of downstream product prices, so even if there are fluctuations in the prices of downstream polyester products, they mostly affect processing spread. However, when looking at the long-term trend, prices have remained relatively flat. Unless there are significant fluctuations in upstream crude oil and PX prices, the prices of downstream PTA-polyester industry chain are unlikely to change significantly. Under normal circumstances, even during price spikes, there will be quick corrections, and downstream end-users can mostly purchase on demand. This also causes that the domestic production and sales of polyester factories don't appear to be particularly outstanding during most time periods, but the rigid demand continues to show resilience.

Of course, as the gradually released new capacity, compressed profitability, and the rat race of new orders, more PET bottle chip factories may reduce or suspend production after the peak summer sales season.