PET bottle chip value back to 6000yuan/mt, how will it move later on

Early Feb, propped up by hiking crude oil and polyester feedstock futures, PET bottle chip price soared to above 6000yuan/mt, MOM rising 600-700yuan/mt, and up 1500yuan/mt from a year earlier. Price surges more than 300yuan/mt in merely two days.

Major reason lies in cost hike. Polymerization cost was around 4600-4650yuan/mt in Jan, while it climbed up to 5050-5100yuan/mt after one month, up 10-11%. The trigger is from PX plants cutting back output or shutdown, and settlement of ACP also helped boosted market sentiment, supporting PTA prices to hike. Besides, as PTA-PX spread stood constantly low, and turnaround plans may increase later on, more traders feel unwilling to sell low. MEG side, MEG fundamental fares better than PTA in H2 2020. MEG spot supply in China is a bit tight since H2 2020, as MEG imports are low, making spot liquidity a bit tight. Hence MEG market trend is stable-to-strong. Cost side has rendered some support to polyester products.

PET bottle chip market began to rise since Nov, and by then it was mainly because of improving export order intake and the frenzy speculative hoarding in China market. The high stock was digested perfectly. Bulk discussion hiked from 4650-4700yuan/mt to 5300-5500yuan/mt by cash EXW. Afterward, as polyester feedstock was range bound, PET bottle chip refilling atmosphere also cooled modestly, and price uptick was restricted. Meanwhile, the accelerated delivery at the end of the year quickened inventory digestion of PET factory, resulting in a rapid decline in factory inventory. By end Jan, PET resin factory inventory was less than 400kt, and the inventory flowing into the society was more than three times this figure, which have greatly alleviated the inventory pressure on the factory, but also increased the burden on trade circulation. This also explains why the market price PET bottle chips has experienced a brief adjustment during this round of rise.

So far, PET bottle chip factory stock has been largely sold out in advance, and later producers only need to deal with delivery issue. On the other side, PET resin export order intake has surpassed 200kt for 4 month in a row, with Jan approaching 260kt, which is a signal of strong recovery in overseas demand. PET bottle chip sales both in and abroad is to normalize. For traders, some dealers that have not operated too many short positions could build moderate stock after the price rise, while for traders who placed too many short positions, and didn’t build stock in time may have encountered some cash flow problem. Some selling interests requiring full payment and at low pricing were seen recently. Once factory price rapidly moved up, PET resin trading volume will also be brought up. For hoarders, price rise is a good timing for selling and getting money back before the Spring Festival holiday. And a spate of such hoarded untaxed goods entered market in previous stage. However, untaxed goods have also pulled back many onlookers, and this part of the hoarded inventory may not be able to enter the mainstream market either in the future. For downstream factories, they have already replenished in advance, and there is no rush to restock goods; and if they have not begun to replenish materials for Q1-Q2 use, we think the procurement rhythm to be a bit too unhurried. At present, it is more difficult to find low priced materials as before, or it may take more time and cost.

Overall, PET bottle chip sellers’ position is being strengthened by various links, and the recovery of seasonal demand is also helping the entire industry chain to circulate. Once delivery for downstream big factories increases gradually after the Spring Festival holiday, coupled with the support of overseas orders, the stamina of price rebound in the future is still relatively sufficient. In addition, market participants also need to pay attention to related industry risks, mainly from several aspects: will the upstream crude oil fluctuate sharply again? Will there still be black swans like the epidemic in early 2020, and will the polyester raw material plants be put into operation smoothly? Can the demand of downstream emerging areas continue to grow?