China PET bottle chip export may see some hope as more PET bottle chip plants close in overseas market

Recently, as PET resin processing spread continuously maintained low, a spate of capacity worldwide were shut down. However, there is a significant disagreement within the European Commission regarding whether to impose anti-dumping duties on PET bottle chip products produced in China. According to the previous announcement, the preliminary ruling was expected to be announced around the end of October. However, it has recently been reported that the European Commission will extend the announcement of the preliminary ruling by one month until the end of November for the anti-dumping investigation.

On March 30, 2023, the European Commission announced that it initiated an anti-dumping investigation on polyethylene terephthalate (PET) with a viscosity equal to or greater than 78 milliliters/gram, originating from China, in response to an application by the European industry organization PET Europe. The EU Combined Nomenclature (CN) code of the products involved is 39076100. The dumping investigation period is from January 1, 2022, to December 31, 2022, and the injury investigation period is from January 1, 2019, to December 31, 2022. The preliminary ruling is expected to be made within 7 months, unless an extension of up to one month is granted.

According to China's customs data, the total amount of PET bottle chip exported from China to the European Union was less than 400,000 tons last year, accounting for about 8.7% of China's total export volume. If we exclude the quantity that is shipped via EU countries to other countries like Ukraine and Switzerland, the proportion may drop to around 6%. Starting from 2023, PET resin export volume of China to the European Union has been reduced to a minimal level, apart from some remaining unfulfilled previous contracts.

Since the beginning of this year, the European Union has increased import tariffs on India and announced a new round of anti-dumping investigations against China. As a result, end-user customers in the EU have had to rely on suppliers from countries such as South Korea, Vietnam, and Turkey to meet their production needs, in addition to local procurement.

Due to the high costs of energy, labor, and raw materials since the Russia-Ukraine conflict, PET bottle chip plants in the EU have been operating at low levels, and the supply has not been able to recover to normal levels for a long time. This has resulted in strong import demand. Recently, one of the largest PET bottle chip suppliers in the EU, JBF, announced a complete shutdown at the end of October (one of the units had already been shut down in September) and is reportedly considering initiating a bankruptcy restructuring process. The plant is unlikely to restart in the short term. After experiencing financial issues in 2017, JBF has been managed by banks and creditors. In the past few years, it was able to cover its production costs due to favorable market conditions and profitability. However, currently, due to high costs, JBF's PET bottle chip products are facing losses of 40-50 euros per tonne, forcing them to consider shutting down.

Apart from JBF, Alpek's PET bottle chip plant in the UK, with an annual production capacity of 200,000 tons, declared force majeure earlier this year due to a shortage of raw material supply. Equipolymers in Germany has been operating at low rate for an extended period, while Neo's three production lines in Lithuania are barely operating at low rates, and one production line has been shut down for a long time. PET bottle chip plants in Spain, Greece and the Netherlands will also face shutdowns in the near future.

Meanwhile, the exit of DAK means that the planned 1.1 million tons PET bottle chip project in the United States may be put on hold, and it is not expected to make much progress in the short term. As a result, US end-user customers may increase their purchases from Asia. With China's significant increase in new production capacity, PET processing spread is expected to remain low in the long run. This may gradually squeeze overseas plants' profit margins, leading to a survival of the fittest or intensive shutdowns. In recent years, there have been minimal new capacities expansion in overseas market, and even slight changes in supply can cause multiple shifts in trade flows. For example, after South Korea increased its exports to the US, China's exports to South Korea increased, while South Korea's exports to the EU decreased. This could create opportunities for suppliers in the Middle East and India. Therefore, the increasing number of shutdowns in EU plants and the postponement of new projects in the US may also provide opportunities for Chinese PET bottle chip manufacturers to export.

Therefore, in 2024, it is expected that China's PET bottle chip exports may gradually recover. On one hand, there is a number of new capacity coming up, which urgently needs other markets to alleviate the pressure. On the other hand, there is still growing overseas demand, coupled with the anticipated decrease in supply, providing Chinese companies with an opportunity to gain more market share.