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Insight | Time: Jul 9 2021 3:45PM
PET bottle chip processing spread low, will plants massively shut down ?
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PET bottle chip processing spread has been squeezed to near 600yuan/mt for a long while. Some plants begin to announce output cutback or shutdown plans.

According to CCFGroup statistics, so far, a total of 900kt/year PET resin capacity has been shut (excluding long-term shut plants previously and not fully run capacity). If future turnaround plans are implemented, like Sanfame to cut production by 30%, Wankai 250kt/year unit to turnaround mid-late Jul(though mainly producing PET fiber chip), Sinopec 150kt/year line to chop output in Jul-Aug, 900kt more output may be reduced in Q3. But since turnaround and output cut doesn't concentrate in the same period of time, impact over industry operating rate is limited.



By then, PET bottle chip industry run may average down to slightly above 70% (80% based on designed capacity). In fact, compared with previous years, such a reduction in output is not too big. Judging from the raw material market this year, polyester raw material prices are still on the low side most of the time, and the duration of the recent sharp rise is not too long, during which there are downward adjustments, so the pressure from the cost side is not very large. Even if some bottle chip factories have the idea of reducing production, not many have actually put it into action.

Therefore, it is not very accurate to reckon the recent shutdown or production reduction from compressed processing spread, not to mention that processing spread of some new plants can actually achieve a relatively low level in recent years. In fact, PET bottle chip factories鈥 shutdown is more of under the pressure of a sharp reduction in new orders. Since the beginning of this year, PET bottle chip factory's inventory has not been high, and there was even supply shortage in some months in H1 2021. However, since producers largely haven鈥檛 taken in full orders for H2 2021, there has always been an expectation of rising inventory pressure in some PET bottle chip factories in the later period. Therefore, when the sea freight rose sharply, leading to shrink export sales, some domestic factories with insufficient domestic orders soon felt the sales pressure.

In the second half year, as end-user capacity increases, demand for PET resin will grow, hence PET bottle chip factory stock level may decline gradually. On the other side, due to shrinking domestic sales and delay in export delivery date, PET bottle chip factory stock may rise. Later on, if turnaround plan keeps like this, exports doesn't see much improvement, PET supply glut in China may be severe.  

[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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