Brief analysis over status quo of PET bottle chip market: factory stock continuously declines

Recently, PET bottle chip spot market fares a strong tons, stronger than forward goods. Due to tight spot supply, players largely queue to pick goods from mainstream producers. Spot trading focuses on 7650-7700yuan/mt by cash EXW, some higher at 7800yuan/mt. Discussion level for Dec goods stands at 7600yuan/mt, and for Jan materials is at 7400-7500yuan/mt EXW. Feb-Mar goods are mainly talked at 7300-7400yuan/mt.

In terms of the current inventory structure, the proportion of PET bottle chip factory inventory has dropped to around 20-30%, while the proportion of end-user factories, in-transit transportation and export delivery has risen to 70% or more. Besides, some producers have oversold spot goods previously, it’s a bit difficult for small-medium customers and some traders to pick goods.

Recently, downstream edible oil and beverage plants began to intensively build Q1 goods, and purchasing interest over high-priced was scarce after ample stock build. Spot market, producers quoted high but there was no supply, and price was at parity with trader prices. Most PET producers have focused on quote for Jan-Feb goods since last week. Beverage producers still need to buy PET materials for Q1. Previously, most downstream plants purchased Dec-Jan delivery goods, and only few to Feb-Mar. Hence after the Spring Festival holiday, delivery demand for Feb-Mar is still strong. Export market, current quote mainly focused on Feb-Mar goods, with few still negotiating Jan materials.

PET sheet sector, at present, it is not easy for sheet factories that make ordinary packaging materials. East China is slightly better, where operating rate can still maintain at 60-70%, while industry run in South China is ranging from 30-40%, partly better at slightly above 50%. As PET bottle chip price rose rapidly this year, and more PET sheet lines were put online, sheet factory processing spread have declined significantly. Recently many have begun to use leftover materials, recycled PET chip and bright chip as a substitute, to reduce raw material costs. Some even began to sell PET raw materials that stored in the warehouse. Of course, not all sheet factories are having a hard time. The O/R of daily chemical packaging producers is very good. Due to good demand and sufficient orders, the current O/R can reach 90-100%.

Overall, PET bottle chip plants may sustain price firm within short, and processing spread may improve in the future. Speculative space may be squeezed. Forward orders, particularly for post-Spring Festival holiday delivery ones, market competition may become fierce, in order to lock the high processing spread.