China PET bottle chip export order intake hits historical high

According to CCFGroup latest statistics, in October 2023, the export order intake of domestic PET bottle chip factories rose again to around 560,000 tons, an increase of more than 110% year-on-year and an increase of 35.5% month-on-month from September. This is the highest monthly export volume for PET bottle chip factories since data has been collected by CCFGroup.

In fact, since August, the export order intake of Chinese PET bottle chip factories has been gradually improving. The improvement in the second half of 2023 is mainly due to the widening gap of polyester raw material costs between regions, which has led to numerous contradictions in the global supply chain. For instance, the O/R in the EU region has remained at a low level for a long time, while in the US, although supply and demand are generally stable, there has been no new capacity for many years, leading to an increasing dependence on imports. Many foreign end-user customers have had to increase their importing ratio in order to maintain stable production, especially in procuring from Asia.

Taking into account the export order intake from August to October, the three-month average value was around 460,000-470,000 tons. Even if a considerable proportion of the new orders are for 2024, it can be reasonably inferred that the shipment volume will not decrease significantly before the Spring Festival. The estimated export volume from November to January is expected to be maintained at an average of 350,000 tons or more, with shipments in certain months possibly exceeding 400,000 tons. However, actual shipments still depend on the final arrangement of the shipping schedule.

The recovery of the export market in recent months is due to several reasons. Firstly, the export price of PET bottle chip has fallen to a range near the lowest point of the year. Secondly, there has been a rigid demand from the market, and small and medium-sized orders are tolerable. Especially before and after the National Day holiday, both domestic and foreign customers have built stock in advance according to their previous experience. 

Thirdly, large overseas factories need to build up stock before the Christmas and Spring Festival holidays, which are typically delivered after the Spring Festival. At the same time, there has been a persistent expectation of a strong economic recovery in both domestic and overseas markets. In addition, although there is new capacity expected to come on stream by the end of the year, it is not expected to have a significant effect on the market supply due to the concentrated maintenance plans. Therefore, the export share of PET bottle chip is expected to remain at 35% or more before the Spring Festival holiday.

As for the domestic market, except for a few large factories, most mainstream end-customers have already begun to purchase orders for 2024, with some having purchased more than half of their orders for the first two quarters. Thus, a cautious wait-and-see attitude has prevailed in the short term. 

Although there is a strong bearish sentiment among traders, it is understood that there is still considerable demand for covering short. In general, the domestic and export orders of PET bottle chip factories are relatively sufficient. The main contradiction now lies in the high inventory in the market circulation and the slowing of end-customers' recent delivery speed, leading to rising factory inventories. Additionally, we believe that it is more important to observe whether the market confidence can gradually recover.

Overall, assuming no unexpected events occur in the macro outlook, we believe that the bottom of the RMB domestic market has been basically achieved, but there is currently insufficient momentum for upward movement, so the spot price of PET bottle chip is expected to remain in a range fluctuation for a relatively long time. In the later stage, the main focus will be on the concentrated export shipments at the end of the year and whether PET bottle chip factory output cut can be extended or gradually resumed.