PET bottle chip price soars 800yuan/mt in single week, key factor--traders lack goods to deliver

PET bottle chip factory price declined to 6600-6650yuan/mt after the Mid-Autumn Festival. But as polyester raw materials cost sharply increased and the energy consumption control policy affected delivery of some factories, it only took less than 4 working days for PET transaction price to jump to 7200-7300yuan/mt, and soma producer raised quotations to around 7500yuan/mt.

In addition to the sharp rise in raw material costs, what other factors are driving up the market price of PET bottle chip?

Typically, Sep and Oct are traditional peak season for knitting textile industry. Beverage producers, which are the main downstream of PET bottle chip, will generally arrange annual maintenance during this period of time, and the demand for PET bottle chip will be greatly weakened. However, under the“dual controls”on energy consumption and energy intensity or the amount of energy consumed per unit of GDP this year, the upstream energy sector is the most affected, with coal and fuel costs continuously rising. It is not uncommon for factories to operate normally in the morning and stop production by emergency notice at noon, and some areas in Northeast China even cut off power without advance notice, triggering heated discussions on internet and media. Affected by this policy, provinces with poor completion of carbon emission target have increased power cuts. Operation of several polyester plants in Jiangsu have been significantly affected, bottle chip capacity reduction has also achieved 450kt/year. During bottle chip off-season when industry run shall decline significantly, the“dual-controls”has been impacting more on PET bottle chip supply side than that of demand side.

In this way, the amount of contracts that can be delivered by the traders is more critical. However, according to common sense, before the third quarter, most traders will not hold too much inventory, basically more players have oversold goods, wishing to use time in exchange for profits. Yet with contract due approaching, market price moved up instead of fall, and many traders were caught off guard. They had to chase up to purchase from factories to fulfill their contract, which indirectly pushed up market prices. During the 9th International PET Industry Forum (2021) held on Sep 23-24, many traders announced to suspend quoting, while some traders still sold nearly 20kt goods.

In addition to traders restocking demand, the hiking crude oil has also warmed up export talking atmosphere. So far, Sep-Oct export delivery volume is expected at more than 500kt, sharply up 80% compared with 2020’s 300kt. If shipping schedule is arranged properly, support from export market will also gradually enhance.

Therefore, on the whole, before the National Day holiday, China PET bottle chip price may still have upward strength. After National Day holiday, if the dual-control policy gradually relaxes and the energy supply can recover, the cost pressure on PET bottle chip is expected to be alleviated. However, considering that there is already a round of stock build by downstream, it is unlikely that buyers continue to replenish after the holiday, then market price may see correction, but downward space shall be limited as the price is backed up by increasing trading volume rather than following up feedstock trend.