PET bottle chip market may get off to a good start post-holiday

On Feb 18, most of the PET bottle chip factories have resumed production, with some offers continuing to increase by 50yuan/mt. However, due to the incomplete return of workers and salespeople in bottle chip factories, PET sheet plants and traders, the market has not fully recovered from the holiday atmosphere, resulting in a lack of actual transactions. Some traders maintained their pre-holiday price levels. Nevertheless, based on the CCFGroup information, it is expected that the atmosphere in the PET bottle chip market will gradually warm up starting from tomorrow with the opening of raw material futures markets.

So, will there be a good start after the holiday? From various aspects, the probability of a good start this year is quite high, but the upward momentum may be somewhat limited. On one hand, before and after the Spring Festival holiday, both crude oil futures and overseas petrochemical raw material prices have risen. At the same time, due to the fact that many large PET bottle chip factories have mostly sold out their goods for February and March delivery in advance and the new capacity will be delayed to put online, the impact on market supply is very limited. In addition, since the peak purchasing season is approaching, PET bottle chip factories had strong willingness to hold prices firm. However, on the other hand, the PET bottle chip factories have already raised their processing spread to around 500yuan/mt before the holiday, reaching a critical point in the upstream-downstream game. It remains to be seen whether the downstream market will follow up with higher prices after the holiday. Based on a preliminary sampling survey of a few end-user plants, most enterprises have not yet reached half of their operating capacity, indicating that recovery will take some time.

In addition, aside from cost and benefit factors, looking solely at the supply and demand situation, most PET bottle chip factories are facing a rise in inventory levels by 7-10 days after the holiday. According CCFGroup initial statistics, the average factory inventory is at slightly below 22 days, with some slightly higher at nearly 40 days and some slightly lower at 10-15 days. It is expected that after the acceleration of end-user pick-up speed next week, factory inventories will gradually decline. Currently, the average plant O/R of PET bottle chip factories is at 72.2%, while is at 79.7% if base on designed capacity, which is slightly lower than pre-holiday level. The figure is expected to recover to 85% or higher in early March. As for export orders, since the fourth quarter of 2023, the average monthly order intake from October to January has been around 450,000 tons. According to information from several mainstream factories in East China, after a concentrated replenishment period, the export shipping schedules for the first quarter for major PET bottle chip factories are tight, with some reportedly almost sold out and starting to offer April materials. The short-term overall sales pressure for PET bottle chip factories is not significant due to most orders being sold in advance under contracts and the expected increase in end-user pick-ups in the later period. For intermediate traders, due to the long Chinese New Year holiday in February, about 30% of the contracts for this month need to be transferred to March for completion. As a result, this may intensify competition in the following period. However, the market is generally supportive for price increases, so a good start could also help to digest some of the existing contract volume.

Considering the purchasing peak season approaching domestically and abroad, if there is no significant adjustment in polyester raw material prices and the downstream market triggers a concentrated replenishment after the holiday, the price of PET bottle chip is expected to continue to rise slightly. However, if the raw material prices show signs of adjustment and there is no strong replenishment from the downstream market, the PET bottle chip market may experience a correction after the rapid rise. Therefore, while monitoring the progress of new capacity launch, it is also recommended that market participants pay attention to the transaction situation next week.