HC re-PSF faces fiercer competition in Zhejiang and Jiangsu

On Jan 24, when the price of HC re-PSF reached a peak of 8,000yuan/mt in Fujian and Guangdong, the low prices in Jiangsu and Zhejiang maintained a price of 7,600yuan/mt. At that time, the mainstream price for hot-washed blue and white bottle flakes was already at 6,300yuan/mt, with a few higher prices at 6,400yuan/mt. In the situation of raw material shortages, the cash flow of recycled PSF was still at the breakeven line or even at a loss, which confused customers in South China.

The main reason for this is that Jiangsu and Zhejiang have too many production bases concentrated in the area, which leads to the suppression of the prices of HC re-PSF. In addition, there are continuous capacity expansion in the future, which has caused most producers to adopt a passive wait-and-see approach instead of raising prices.

1. The largest production bases for HC re-PSF in Zhejiang and Jiangsu

In 2019, the capacity of HC re-PSF in Jiangsu and Zhejiang accounted for more than half, reaching 53%. Subsequently, due to demolitions and voluntary quit, the capacity of Zhejiang was transferred to Jiangsu, Anhui, and foreign countries. Although the proportion in Zhejiang has decreased in 2023, it still occupies the largest y. Moreover, with future expansions, the proportion in Jiangsu and Zhejiang will continue to rise.

2. HC virgin PSF capacity continues to expand, and price spread between HC virgin PSF and HC re-PSF is low

In 2020, the supply of HC virgin PSF increased significantly, squeezing the market share of HC re-PSF. From 2021 to 2022, factories with cost advantages, brand advantages, and regional advantages continued to expand their capacity, leading to intense competition between new and old facilities and fierce competition for market share between virgin and recycled products. When crude oil prices were high, HC virgin PSF faced greater pressure, especially for factories without upstream and downstream support. New factories suffered continuous losses, and non-advantaged private factories experienced long-term shutdowns. When crude oil prices were low, the pressure on virgin and recycled markets was still significant, and product switching became more flexible. In the case of supply and demand mismatch, the peak and off-peak seasons became blurred, and the profitability of the industry sharply declined or even fell into losses. Due to the impact of the pandemic and a weak market, most of the new HC re-PSF facilities planned for 2022 were delayed until 2023. Under the pressure of supply, the market competition was fierce in 2023, and the peak season was not prosperous. Prices mostly followed fluctuations in production costs, resulting in reduced bargaining power for HC re-PSF manufacturers.

The price difference between HC virgin PSF and HC re-PSF is also continuously shrinking. Currently, the mainstream price for HC virgin PSF is at 7,900-8,500yuan/mt, and for HC re-PSF, it is at 7600-8000yuan/mt. The prices of low-priced HC virgin PSF are similar to the prices of HC re-PSF. The capacity of HC virgin PSF is mainly concentrated in Jiangsu and Zhejiang, where the price suppression effect is stronger, limiting the price increase for major manufacturers. With no HC virgin PSF capacity, HC re-PSF prices reach 8,000yuan/mt first in Guangdong and Fujian.

3. New capacity of HC re-PSF in 2024 still focuses on Jiangsu and Zhejiang

In 2024, most new capacities of HC re-PSF are in Zhejiang and Jiangsu, leading to more intense competition in procurement and sales. Some factories in Anhui have new capacity expansion plans, and a few local virgin PSF factories are considering a shift to HC re-PSF.

In summary, the Jiangsu and Zhejiang regions are indeed facing fiercer competition.