More overseas PET bottle chip plants cut back output and China PET USD-RMB price spread keeps widening

Due to the sharp rise in energy costs, more PET bottle chip plants in the European Union cut back output or shut down. In the fourth quarter, it is estimated that the bottle chip capacity shut down will reach 1.46 million tons, accounting for about 40% of the local total. Among them, Indorama plants based in Spain, Poland and the Netherlands all plan to turnaround in the fourth quarter, mainly from mid-late October to December, while Germany Equipolymers plans to turnaround in the first half of November. Local quote for PET bottle chip is reported to have risen to around 1400 euros per ton, equivalent to about $1630/mt.

In addition, Indorama Brazil 550kt/year PET bottle chip line announced force majeure near mid-August due to a fire, and has been shut ever since. At present, Lotte Chemical’s PET bottle chip units in South Korea are all closed, of which NO. 2 and 3 lines have been stopped for maintenance near the end of September and are expected to restart at the end of October; Line 1 is scheduled to restart around mid-November. TK Chemical's 300kt/year PET bottle chip plant plans stop for maintenance in November. According to above statistics, the total capacity closure of overseas PET bottle chip plants is at 2.81 million tons, accounting for about 8% of the global total capacity. It is not ruled out that the output cutback or shutdown will continue to increase in the future if the energy crisis continuously deteriorates.

Figure 1. Overseas PET bottle chip plants operation status

Affected by the energy crisis, at least two local bottle chip factories in the European Union have announced an additional charge of 150-170euros/ton in the contract price from November, and DAK in North America has also announced an additional charge of 110USD/ton. Precisely because of the numerous output cutback and plants shutdown in Europe and the United States, coupled with the fact that PET resin materials in South Korea and the Middle East are sold out in advance, power cuts in India, epidemic led ports congestion in Southeast Asia, strikes in Europe and the United States, since the third quarter, many overseas bottle chip buyers have poured into China for purchase. With the promotion of bulk and assembled shipping, to a certain extent, it has offset part of the adverse impact of rising sea freight on Chinese PET bottle chip producers.

According to CCFGroup statistics, since the end of August, export price of PET bottle chip in China has risen more than $240/mt, with an increase of about 1700-1750yuan/mt, while the domestic RMB price has risen by 1400yuan/mt during the same period. As of October 20, 2021, according to CCFGroup price index, the RMB processing spread of water bottle chip is 1365yuan/mt, while the processing spread for export materials has risen to around $257/mt, which is about 1645yuan/mt. Therefore, under the same calculation mode of raw material cost, the profit from exports has far exceeded that of domestic sales. Therefore, domestic producers mainly hold price firm, and export quote will be revised up once there are some trading done. Spread between RMB and USD value keeps enlarging. It is heard that one bottle chip factory received more than 80,000 tons of orders in the first half of Oct alone, and the plant recently considers to suspend order intake.

At present, there are a lot of overseas enquiries, but most of them require the shipping date to be in November, so many orders have been negotiated for a long time, resulting in overseas customers not making a decision in time, while the quotation of factory has already begun to raise. Most of the recent orders come from the Middle East, Africa and Eastern Europe, and EU customers are slow to respond due to jet lag and other factors. Therefore, some overseas customers have begun to seek RMB resources from China's domestic traders, and recently we have also heard that some domestic goods have been transferred to export. However, due to the small quantity, shipping offer by forwarders is quite high, hence the overall CIF price may still be higher than that of the bottle chip factory ones.