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Insight | Time: Jun 14 2018 2:22PM
Why PET bottle chip turnover tends thin while price firm
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Some PET resin plants in Jiangsu were shut or cut production due to environmental protection inspection recently. Spot price maintained firm though trading volume of PET bottle chip turned thinner.

Major reasons are as follows:
1. Due to regional delivery tightness, while upstream cost changed little, PET bottle chip producers tended to keep firm quote and reduce discounts.

2. Since PET value didn't get chopped substantially as expected, small downstream plants turned hurriedly to purchase spot materials to guarantee normal production, which to some extent quicken the destocking of traders (since spot materials are generally held by large traders).

Besides, with beverage sales peak arriving, PET bottle chip delivery climax is also to come. Recently, large beverage producers began to procure raw materials for Jul-Aug use, and volume generally covers half-one month. This means despite discounts negotiable for forward orders, Jul materials distributed to traders and small-medium buyers are shrinking.

Of course, expectation of weaker supply demand pattern still exists in Q3. So far, Jun/Jul spread reached 400-500yuan/mt in some plant. Turning point may emerge in Jul.

Firstly, new capacity both in and abroad start to supply new materials, like SFX’s 500kt/year line and Vietnam Far Eastern’s 400kt/year line.

PET bottle chip plant operating status
Category Country Producer Capacity(kt/year) Closed Start schedule
maintenance China Dragon Special Resin 250 late Jun mid Jul
new China Sanfangxiang 500   end Jun
new Vietnam Far Eastern 400   Jul
new Lithuania Neo 160   end Jun
restarted China Chengxing 600 early Jun end Jun
restarted U.S. M&G 360 Oct-17 Jul
restarted Belgium JBF 400 May mid Jun
restarted Oman OCTAL 500 end May end Jun
shift production China Far Eastern 150 early Jun end Jun

Secondly, as PET bottle chip price moved higher, some PET sheet plants that are undemanding in quality began turning to purchase bright chip to mix at certain ratio to produce PET sheet products. So far, bright chip/PET resin spread is above 2000yuan/mt, hence for PET sheet plants, even to purchase new facility to add viscosity is cost-efficient. PET sheet customer base is small, but they could affect PET resin price in the future, especially traders’ selling attitude.

Thirdly, overseas shut units will gradually restart, suck JBF Belgium plant’s O/R is recovering, which is said to have resumed 70% supply. M&G America’s 360kt/year line may resume in Jul.

Currently, market focus mainly rests on delivery, a problem awaiting to be solved in the coming two months. Later on, new capacity release and flattening seasonal order may bring some pressure, but also depends on whether these plants could commence as scheduled.

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