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Insight | Time: Apr 29 2020 2:53PM
China PET bottle chip exports see improvement in Mar, but concerns still exist
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According to the Customs, China PET chip export volume totals 385kt in Mar 2020, y-o-y falling 4.9%, including 48kt for HS code 39076910, y-o-y down 10.6%, and 337kt for HS code 39076110, y-o-y falling 4%. Calculating HS code 39076110 alone, PET bottle chip exports totaled 667kt in Jan-Mar, y-o-y slipping 22.9%. If combines HS code 39076110 and 39076910, PET resin exports totaled 720kt in Q1, y-o-y down 23%. Mar demand has enhanced in drastic, as exports in single month has surpassed Jan-Feb total.

Mar exports hike is mainly due to delay of Feb orders, including some orders that delayed delivery to Apr. Hence, Mar export volume exceeding 300kt is no strange. So far so speaking, Apr export delivery volume may decline obviously comparing with Mar, possibly to slightly higher than 200kt.

Currently, PET resin factory stock level doesn’t count low, but delivery of some specs sees tightness, where does the stock head to then?

In fact, impacted by the pandemic, China government offers preferential treatment policies like low-interest or interest-free loans for small and medium-sized enterprises, so small and medium-sized enterprises or traders can enjoy this part of the policy dividend through certain channels. Some of which are used to invest in real estate, and some are used to buy bottom of all epidemic prevention products, such as the masks, melt-blown nonwoven fabric which is still very popular. Some plants choose to build PET bottle chip stock to produce protective equipment or for speculation. Therefore, it’s not the beverage plants or water enterprises that we talked about picking up a lot of goods, but are these small and medium-sized customers. Massive delivery within short makes the story of ants shaking elephants.

Either way, investment needs to be profitable in the end. If this part of demand can’t be consumed in end-user market, demand sustainability is still worth discussing.

Q1 export order intake totaled 690kt, y-o-y falling 16%. Affected by pandemic early 2020, delivery of export order post-Spring Festival holiday is numerous.

Figure 1. PET bottle chip exports in Q1 2019-2020 by origin
Destination Jan-Mar 2020 Jan-Mar 2019 y-o-y growth
Philippines 5.57 4.75 17.13%
India 5.21 8.70 -40.15%
Chile 3.48 2.81 23.60%
Russia (RU) 3.40 3.56 -4.35%
Peru 2.59 2.39 8.65%
Algeria 2.55 3.38 -24.64%
Vietnam 2.14 1.97 8.75%
South Korea 2.13 2.04 4.49%
Kenya 2.02 1.56 29.41%
Burma 1.98 1.72 15.12%
Thailand 1.68 1.83 -8.21%
Malaysia 1.65 1.35 22.24%
Kazakhstan 1.61 1.65 -2.13%
Ghana 1.52 1.57 -2.85%
Mexico 1.41 2.09 -32.46%
Ukraine 1.28 3.23 -60.31%
Indonesia 1.26 1.73 -26.90%
Australia 1.21 1.73 -30.23%
Uzbekistan 1.10 1.07 2.50%
Greece 1.01 0.53 88.14%

Note: volume above 10kt

Exports to Southeast Asia and South America are stable, and y-o-y growth is largely double digits, mainly because local demand is strong on high temperature. Philippines replaced India to become Q1 2020 top 1 destination.

Overall, global PET bottle chip capacity may expand 1.7 million tons (1.45 million tons from China mainland). If overseas pandemic doesn’t enhance, China PET bottle chip exports may face difficulties. CCFGroup estimates 2020 China PET resin exports to drop to 2.9 million tons, y-o-y falling 8%. We believe that 2020 demand growth shall focus on the development and excavation of the domestic market, especially non-bottle demand; as for price, it is mainly affected by the macro aspect and crude oil in near future, and changes in supply and demand in the later stage. The market may consolidate at the bottom for a long time, and market participants need to be prepared for a protracted war in advance.

[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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