PET bottle chip sales may keep hot this winter

Recently, PET bottle chip sales is quite impressive both in and abroad. Processing spread maintains high and trading volume also expands. In the past one month, concerns over supply tightness continues to increase, and large PET downstream plants have been purchasing all the time, ranging from Q4 spot goods to forward goods delivered in Q2 2022. According to CCFGroup incomplete statistics, the procurement volume of large downstream factories is about 600kt in November, followed by more than 200kt bidding on December 1. If the tenders are all settled, then within one month or so, downstream beverage and edible oil manufacturers have purchased more than 800kt.

So far, price spread between spot and forward goods is at 800yuan/mt to the biggest. On one side, PET bottle chip factory stock level continuously declines, and players need to queue to pick up goods. Spot value is at parity with factory prices. On the other side, processing spread for forward goods is wide, and plants are willing to offer big discounts when downstream show interest to purchase. So far as we know, trading price for post-Spring Festival holiday delivered order has breached below 7000yuan/mt, and some lower heard at 6800yuan/mt.

Besides, heat in export market doesn't cool. Sep-Oct export order intake has reached 400kt. Though the figure retreats modestly in Nov, it also hit 300kt. That means Sep-Nov exports totals 1.1 million tons. Considering the unstable shipping schedule, we take Aug-Nov volume as a reference range, which is estimated at 1.4 million tons or so. Except for Sep-Oct delivered volume at 530kt, there is still 900kt materials to be delivered. From this point of view, about 1.6 million tons PET resin has basically been digested ahead of schedule in the first half of next year. As we know, China domestic contract demand is at about 200kt per month, if we take H1 2021 output of about 5.21 million tons as the base, and then take into account Wankai Chongqing Phase II 600kt output by proportion, it is of high probability that the actual sales volume accounts for more than 50 percent of the output from January to June 2022. Therefore, it is expected that the actual control of market prices by the PET bottle chip factories will be further strengthened in the first half of 2022.

At present, the trading atmosphere in the market is actually polarized. On the one hand is the procurement competition between the downstream large buyers, and on the other is the downstream small and medium-sized customers shouting at a loss. Many sheet customers turn to purchase PET leftover material, recycled PET chip and bright chip instead. Traders who sold too many short orders in early stage were also heard choosing to terminate the contract. For small and medium-sized customers, producing on spot purchases now may not be a bad thing. This part of customer's own consumption is not large, speculative opportunity to buy at a low price also exists. Because most of the contract orders will flow to traders, and polyester raw materials also move in line, the polymerization cost will not be very high in the future. So even if factory supply is tight next year, source from traders that sign contract with factory is a relatively good choice. This is, of course, based on the fact that there are no accidents in 2022.

Overall, we believe such market pattern may continue for some time. On one hand, there is indeed a gap in spot supply, and the procurement of large downstream manufacturers will not slow down; on the other hand, overseas PET plants have not yet fully resumed, and it still takes time to digest the export orders. From a long-term point of view, there is still plenty of room for price adjustment. Coupled with the continuous high trading volume, the market inventory structure may change greatly in the future, which deserves market participants' attention.