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Insight | Time: Aug 26 2020 10:56AM
The logic of recent PET flakes price rebound
 
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Recently, HC re-PSF market witnesses improvement apparently. Plants reflect that sales are relatively good generally, and inventory reduces much, especially Guangdong market, inventory in plants is basically depleted, and some plants still have orders to deliver later. In Zhejiang market, some plants that have been focusing on liquidating stocks for long time also see the inventory depleted, and inventory in other plants also reduces continually. However, as the inventory is generally high, and no discounts are seen for sales promotion, the de-stocking is not fast.

Driven by the HC re-PSF market, PET flake prices rebound somewhat. The purchase price of three-colored bottle bales in Fujian market has risen from 2,500-2,600yuan/mt to 2,900-3,000yuan/mt. In Guangdong, blue and white bottle bale prices move up from 2,900yuan/mt to around 3,100yuan/mt. In Zhejiang and Jiangsu, cold washed blue and white flakes tick up from 3,400-3,500yuan/mt to 3,600-3,700yuan/mt. In the context of price rebounds, suppliers have become cautious to sell and expect to hold the products first to wait the prices up further.

Recently, PET flake suppliers and recycled chemical fiber producers have been consulting on the logic of this rebound. In our views, the prices of rough bottles, bottle bales and PET flakes previously have been at the cost line or even face deficits. This rebound is a return to normal level. And prices of PET flakes maintain low for a long time, and feedstock inventory is consumed obviously, which is for normal replenishment demand.

We can see that HC re-PSF prices have no obvious rise this time. Except for the upswing of some lower offers, most plants maintain the selling prices, focusing on sales. Though the pandemic condition improves and demand from domestic and Europe recovers gradually, the demand remains weak overall compared to previous years. Therefore, trading volumes improve, but prices remain flat, and the cash flow has also been significantly compressed. In addition, prices of close virgin PSF 1.5D for spinning hold flat at 5,000yuan/mt. Under the pressure of virgin PSF 1.4D, prices are hard to rise, and operating rate remains at low level. Sales are also ordinary. Therefore, close virgin PSF plants cannot accept the higher prices of PET flakes.

In general, pay attention to the continuity of the HC re-PSF market in the later stage, and whether PET flake prices will rise overall.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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