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Insight | Time:Jun 16 2017 5:36PM
Why PET bottle chip value adjustment quickens
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PET resin price slowly followed up feedstock recently, and up space was restrained. Market players also fared a bit tangled, mainly because materials are soon to be released from new capacity while demand is to enter slack season.

In the second half of Jun, two PET resin units are to launch. Jiangyin Chengxing’s 600kt/year PET resin line has begun feeding raw materials on Jun 13th. The other is Yisheng Hainan’s 250kt line, which may start feeding feedstock in mid-late Jun. If operation smooth, on-spec products might be available end Jun or early Jul. Thus, PET resin supply is projected to balloon in Jul given no turnarounds. Excluding maintenance plans, and take new capacity to run at 80%, monthly supply is estimated to raise 60kt in Q3.

Figure 1. PET bottle chip capacity expansion plan in Q2
Plant Capacity (kt/year) Time of launch Remark
Jiangyin Chengxing 600 13-Jun  
Yisheng Hainan 250 Mid-late Jun Shanghai Hengyi’s old unit to relocate

Looking at factory order intake, delivery of domestic orders are generally arranged to Jul, with some plant to Aug. Export materials are largely sold out for Jun except for some plants that experienced poor sales due to high pricing previously, and export delivery could be arranged to Jul. Shortly, stock level won’t feel much pressure, and is pegged at 17-20 days before above deliveries. Checking historical data, downstream consumption is typically high in Q3, but since PET resin producers need to take in order ahead of time, downstream usually build stock in advance. Hence sales pressure remains in Q3. Moreover, if PET resin supply expands by 10% and order intake slips over 10%, Q3 selling pressure may shoot up. In normal case, production cut or shutdown will increase in line.

The other issue worth attention is that cost of auxiliary materials has been ramping up in recent 2 years. PET bottle chip producers are facing increasing difficulty to control cost, particularly for those who have no integrated feedstock plants. Thus PET resin producers are controlling their selling pace with or without purpose, when feedstock price became volatile, and control on selling volume is obvious especially during some low-pricing period of time. Besides, price adjustment quickens. Traders’ speculative space however gets restrained and some radical traders even faced loss. In all, though factories quote firmly, they don’t reject promotion at certain pricing for more turnover. That partly explains why PET price generally hovered near 7000-7350yuan/mt by cash EXW in Q2, excluding some period of below 7000yuan/mt level.

Supply pressure is to increase in Q3 and production cut or shutdown expectation also strengthens. Downstream demand will flatten later but rigid demand may be able to sustain if it’s persistently burning hot this summer. So far, PET resin producers primarily quote firmly on high cost, but they still need to make some preparation for future sales and delivery.

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