PET bottle chip regional price spread widens and prices climbs higher despite falling raw materials

Recently, Jiangyin area was under control due to epidemic, and logistics was restrained. Besides, Yisheng Dalian plans to turnaround mid-May. PET bottle chip supply in China tightens recently, and spot valve continuously moves higher. Despite the weakness in polyester feedstock, PET resin processing spread rapidly widens to 1500-1600yuan/mt by cash EXW.

As capacity distribution in North China is scarce, and Anyang Chemical turnaround just comes to an end, hence stock is quite limited. Later, Yisheng Dalian announces turnaround plan mid-May, market supply substantially shrinks. In South China, China Resources Zhuhai 500kt/year restarts, modestly easing the supply tightness. Downstream PET sheet plants begin to sell PET bottle chip instead of taking end-user order as feedstock price hikes too quickly. Demand for PET bottle chip reduces. So far as we know, most of the large beverage factories have been running at full rate, and O/R of most edible oil factories has risen to around 70%. Running rate of PET sheet factories in East China ranges from 60% to 70%, while that in South China is only 30%.

Therefore, the price spread between the North and South China markets has widened to a few hundred yuan. In North China and Northeast China, local spot price once climbed to 8800-8900yuan/ton, and some large orders slightly lower at 8600-8700yuan/ton. Traders offer for May-Jun goods held firm at 8550-8600yuan/mt by cash EXW. In South China, trader offer was around 8550yuan/mt, but seldom buyers purchased. In Southwest China, there is only one producer—Wankai, and local PTA plants were largely shut down, supply was limited, hence PET bottle chip operating rate was also low. Local PET spot price once climbed up to 9150yuan/ton short distance delivered.

In view of the recent tightening spot supply and the rising market prices, some large downstream factories also began to replenish stock, and restocking volume reached 70kt on May 10, largely for May-Jul delivery. If the replenishment activity continues, spot supply may become quite tight, and price is hard to chase down feedstock. Besides, due to the high proportion of Sanfame and Yisheng Dalian goods in market circulation, the inventory costs of some traders are gradually rising, and the risk of short selling is also expanding recently.