Q&A regarding PET bottle chip market pre-Spring Festival holiday

1. What is the impact of the recent epidemic on the delivery of PET bottle chip?

Recently, due to the spread of epidemic nationwide, PET bottle chip delivery in some regions were affected to some extent.

First of all, for low-risk areas, pickup of PET bottle chip only requires the health code and itinerary code. If the travel code has a star or comes from a medium-to-high-risk area, nucleic acid reports within 48 hours are required.

Secondly, some areas are restricted to internal circulation. People cannot go out of the province or out of the city, and these cities mainly concentrated in the north. People once been to Tianjin and Henan are not allowed to pick up goods at Dalian factories; all logistics vehicles in Tianjin are only allowed to circulate in the city and are not allowed to leave Tianjin; Anyang (Henan) is faced with traffic control, and many logistics drivers are reluctant to go to the factory to pick up goods, in case there is a need for isolation due to changes in health codes and itinerary codes. Most other regions currently maintain normal operation, and there are no other additional regulations.

2. Downstream beverage, edible oil and PET sheet plants operation condition enhances

According to CCFGroup statistics, operating rate of major downstream plants in January is higher than that in December. Several large beverage factories have raised their running rate to more than 70%, some 80%. Edible oil factories are mostly operating at full capacity. Sheet factories have been on the rise recently due to the rush of orders pre-holiday.

Running rate of most sheet factories in East China have lifted 70-90%, with few at 100%. In South China, operating rate has risen from 30-50% to 60-70%. However, comparatively speaking, sheet factories in South China have built PET stock in advance, and there is no new procurement recently. In East China, due to the serious oversale by traders in early stage, sheet factories are in short of spot PET. In addition, as the price spread between PET bottle chip and bright chip has reached nearly 1500yuan/mt, sheet factories once purchased bright chip as a backup, but this has pushed bright chip prices to continuously rise, and supply of some sellers also see tightness. Coupled with the difficulties in picking up goods in some parts of the north, sheet factories also have to re-consider to accept PET bottle chip at the cost of 8000yuan/mt plus, which is also one of the reasons why the spot trading atmosphere has rebounded. Besides, End-user plants began to close this week, and trading is expected to flatten gradually.

3. How is PET supply trend around China Lunar New Year holiday? First rise and then decline

Before the Spring Festival, PET bottle chip shut capacity includes China Resources Changzhou 600000 tons, China Resources Zhuhai 500000 tons and Dragon Special Resin 250000 tons. Units that turned to produce other products include Wankai 250000 tons and Petrochemical Liaoyang 100000 tons. Therefore, it theoretically affects the monthly output of about 200000 tons, and Jan may keep destocking. After the Spring Festival holiday, Chongqing Wankai Phase II 600000 tons line is expected to affect market supply, meanwhile Dragon Special Resin and China Resources Changzhou plants will also resume one after another. In this way, there will be a significant rebound in monthly production from February to March. PET stock may modestly pile up in February. Of course, as most of the PET bottle chip factories have fulfilled their sales target in the first quarter, order is not a big problem, and the recovery of capacity has a limited impact on the market supply. Therefore, considering the relatively concentrated delivery of domestic and foreign orders in March, the probability of destocking at the end of March may also be high. Since April, Yisheng Dalian and Far Eastern Shanghai all have maintenance plans, so the market supply at the beginning of the second quarter may tighten, which is worthy of market attention. Of course, it also depends on the actual implementation at that time.

4. Can export sales stay hot? ---There is a high probability of cooling before the holiday, but there are still expectations after the festival.

Recently, with the continuous rise in export prices, the export trading atmosphere has declined somewhat. Export order intake in Jan is likely to be significantly lower than that in December. However, as export sales in the fourth quarter of 2021 reached an all-time high, export delivery volume in the first quarter may also be relatively high. After the Spring Festival holiday, the market mainly deals with the demand of the peak season, and the current order mainly talks about April-May goods, so we believe that the sustainability of overseas demand after the holiday is worth expecting.

5. Do you need to build stock? --It is recommended to keep a certain amount of inventory for the Spring Festival.

If plants have rigid demand, we suggest to build part of stock (though it is a bit late to consider this problem). Apart from few plant, most mainstream producers have generally sold out spot PET, and large downstream purchases have also come to an end. However, the slowdown in new sales does not mean that delivery will volume decline later on. The spot price continued to rise, which has risen to more than 8200yuan/mt at present, and there is little probability of a significant decline after the holiday. Considering that the price is already relatively high, customers who have built stock in advance can wait and see, while downstream customers who do not have enough stock so far need to grit their teeth and restock some materials first.