Can PET resin market stabilize with daily turnover exceeding 90kt?

After two months of continuous gloom, PET bottle chip market finally got off to a good start in the beginning of November, with a daily turnover of more than 90,000 tons on Nov 1, bringing a little confidence to the gloomy market. So will the PET bottle chip market stabilize? At present, market participators still hold a cautious and wait-and-see attitude for the future, but there is still a lot of speculative demand seeing from the turnover.

From the perspective of historical trend, there are only two conditions for the PET bottle chip market price to stabilize: one is that the cost stabilizes or rises, and the other is the significant rebound in demand.

Cost

From the cost side, the rise in polyester feedstock futures is mainly driven by the easing of the macro mentality, especially the early discussion on the prevention and control of the epidemic has triggered a rebound in commodities and stock markets. However, seeing from the two major raw material products, PTA and MEG, in the short term, in addition to the maintenance plan for the PTA plant and the new production capacity plan for MEG, there is no obvious change in fundamentals, and there is a lack of obvious upward or downward drive in their own market for the time being, and there is a high probability of stabilizing and fluctuating within the low range.

Demand

In terms of demand, it can be divided into two parts: China domestic demand and overseas demand. Since 2018, PET bottle chip market has risen, and the biggest driver comes from the sharp rise in export orders. However, at present, the export market is mild. Although delivery volume can basically be guaranteed at 300,000 tons or more, since the third quarter, new orders are basically lower than the same level of last year, with limited support for the market, and even a drag on the China domestic market mentality. As for China domestic sales, although Nov-Dec orders seem mediocre as a whole, the procurement volume for 2023 goods continue to rise. According to the statistics of CCFGroup, from Oct to the beginning of Nov, the procurement volume of China domestic downstream large factories reached about 440,000 tons, most of which are Q1 2023 orders. In general, as the price keeps hitting new lows, the purchasing enthusiasm of downstream factories is also rising. The purchase price also go all the way down from 7,300yuan/mt to around 6,450yuan/mt EXW. So from this point of view, recently, the rise in the buying interest of domestic forward goods is one of the main reasons to the bottom out of PET bottle chip market.

Plant maintenance

In addition, from November to December, PET bottle market will usher in the last turnaround season in 2022, including Yisheng Hainan 500kt/year PET bottle chip unit, China Resources(Zhuhai) 600kt/year unit, Far Eastern 550kt/year unit, Sinopec Yizheng 150kt/year unit and Dragon Special Resin 250kt/year unit, totaling 2.05 million tons. Due to the partial staggered maintenance time, the maximum impact on the operating rate is expected to be about 14 percentage points. In terms of new start-ups, in Nov, Sichuan Hanjiang New Material 500kt/year new PET bottle chip unit is expected to put into production, but it is expected that the final delivery of superior products to the market may be by the end of Nov or early Dec, which will not have a significant impact on the market for the time being.

Overall, in the short term, due to the stabilization of polyester feedstock costs and the plant maintenance plans, PET bottle chip market may bottom out. However, as downstream major producers keep purchasing large amount of forward goods, some bottle chip plants may make transactions with discounts in order to maintain market share.