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Insight | Time: Feb 24 2021 9:24AM
PET bottle chip price soars above 7000yuanmt, why and how will it trend later on
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In merely 3 working days, PET bottle chip price has breached above previous high, rising more than 12%. If compared with 2020 low of 4650yuan/mt and $645/mt, PET bottle chip RMB and USD price has hiked 44% and 48.8% as of Feb 22, which both surpassed 2020 high point. On Feb 23, quote has moved up to 7200-7400yuan/mt by cash EXW, and some large plant even raised offer for 3 times, traders generally stopped quoting or continuously revising up offer.

How long could PET resin sustain its uptrend?
From feedstock side, WTI and Brent oil futures both hiked above previous high, driving up polyester feedstock cost. Some international evaluation institutions have also raised their high estimates. Such rising trend stimulated by the inflation may not end within short term. From industry side, average operating rate of the polyester plants is around 85.9%, which is still in the recovery, and O/R of PTA plants is also near this level. Hence, PTA stock level still inched higher. Hence after the holiday, despite expanding PTA turnover, PTA futures price rise is less than that of PX. PTA-PX spread squeezed significantly. Later, PTA may move in line with PX trend. MEG plant in US delayed restart due to the cold wave, hence fundamental was a bit strong. Market may substantially destock in Mar. From this point of view, without a sharp fall in crude oil prices, polyester feedstock price correction may not occur until end Mar to Apr. Meanwhile, this period of time is a delivery peak of PET bottle chip, hence which factor is stronger is worth attention by then.

Fundamental side, PET bottle chip factories began to destock since Nov 2020, bolstered by intensive speculative hoarding in China market and recovering export orders. Before Spring Festival holiday, factory stock level averaged at around 10-15 days, which increased to less than 20 days post-holiday, which is still historical low. Before the holiday, with volatile exchange rate and soaring shipping fees, some on-need demand from overseas countries like Africa and S. America helped boosted up China’s monthly export order intake to more than 250kt, supporting PET resin price to continuously rise. After the holiday, shipping freight retreated modestly, but shipping date remained a problem, hence many overseas plants chose to build PET stock in advance due to rising local feedstock cost, indirectly pushing up PET USD price. In Feb, export sales of PET resin factory has breached above 50kt so far, with few even approaching 90kt.

Considering delivery to increase post-Spring Festival holiday, PET bottle chip plants operating rate may continue lifting in Mar. Meanwhile, China Resources Zhuhai’s new plant is poised to launch end-Mar to early Apr, if everything smooth, PET supply may increase. From previous order intake situation, and considering peak season demand in Q2, China Resources Zhuhai’s new capacity launch may merely alleviate factory’s delivery pressure, and won’t become a driver to affect market prices.

Overall, we expect PET bottle chip price to climb further in H1 Mar, while with supply increasing, PET price may correct down. But since current stock level is low, PET downward space shall also be limited. Players could build modest stock on need at low rates.
[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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