PET bottle chip processing margin has improved, but the supply-demand outlook remains challenging

The coordinated production cut in the PET bottle chip industry to "counter internal competition" is currently underway. Since late June 2025, several major PET bottle chip manufacturers have successively implemented plant maintenance, reducing the domestic O/R to around 80%. The industry-wide execution has been effective. In fact, with the recent decline in futures prices of upstream polyester raw materials, the processing margins of PET bottle chip plants have shown marginal improvement. The domestic bottle chip processing spread has rebounded from a historical low of around 150-170yuan/mt in late June to over 400-450yuan/mt. However, due to weaker execution compared to the same period last year, the destocking rate of PET bottle chip inventory has been slow. Although the processing spread has recovered, it remains on the brink of losses. Coupled with the current poor performance of new orders, some bottle chip plants have recently begun considering further production cuts to reduce losses.

Comparison of plant utilization rates of PET bottle chip manufacturers (by design capacity)

From the perspective of raw materials, PX continues to show a destocking trend for PTA in the fourth quarter. In terms of direct demand, PX is unlikely to weaken significantly at this point. However, given the limited expected peak utilization rate of polyester and the anticipated decline in downstream demand in the later part of the fourth quarter, both PX and PTA lack further positive support. From a fundamental perspective, the market is expected to remain weak and volatile. Meanwhile, the recent increase in spot market circulation of PTA has led to weaker short-term spot basis and limited upward momentum, with low processing margins likely to persist in the later period. For MEG, supply and demand remains tight in the near term, and basis still have some support during the delivery period. However, as new plants commence production, supply and demand in the distant months are expected to loosen, putting pressure on the futures market. Future changes in plant operations shall be closely monitored. Overall, the structure of PX/MEG > polyester > PTA remains unbroken, but the market generally holds a bearish outlook on future terminal demand, which is one of the key factors contributing to the recent weakness in the market.

From the fundamental perspective of PET bottle chip, achieving supply-demand rebalancing in the fourth quarter of 2025 will be challenging. On one hand, the impact of the soft drink and bottled water off-season in the fourth quarter will gradually become more apparent, putting significant pressure on PET bottle chip to maintain prices amid weakening supply and demand. On the other hand, based on export order intake in recent months, the average sales volume for bottle chip plants is only around 400,000 tons. Although domestic traders have shifted to export sales, their support for domestic sales is further weakening, as evidenced by the significant compression of import processing spread.

Additionally, with the compression of PET bottle chip profits, the price gap between PET bottle chip and PET fiber chip has gradually narrowed, leading to a decline in substitutive consumption of PET fiber chip. This has partially mitigated the negative pressure from downstream sectors such as soft drinks, while demand for PET sheet materials has increased. However, since soft drink consumption accounts for a significant portion of PET bottle chip demand, and domestic demand for beverages in the fourth quarter is expected to be insufficient, exports have not shown clear signs of recovery. Overall, the PET bottle chip market is likely to continue accumulating inventory. However, it remains to be seen whether inventory pressure will shift from producers to other circulation sectors or continue to accumulate in plants, forcing further production cuts or shutdowns.