China PET bottle chip purchasing cycle approaches, market may see new round of battle for market share

Since the end of September and early October, the daily trading volume in the PET bottle chip market has exceeded 200,000 tons. Recently, downstream major factories have once again purchased intensively, with some factory purchasing close to 200,000 tons in a single transaction. The processing spread for downstream end-user factories ranged from 400-600yuan/ton at the beginning of October, while recent discussions among end-user customers and traders have set the processing spread at around 500yuan/ton for near-term goods.

From the recent market feedback, the phenomenon of overselling low-priced goods by domestic traders in December is quite apparent. Most traders who sold short positions earlier are facing replenishment issues, which has led to a supply decrease in low-priced goods, as fewer traders are offering discounts. However, with the gradual release of new capacity in the future, the supply will be relatively sufficient, and end-user customers do not need to be overly concerned. Looking at the medium and long term, supply is unlikely to be in shortage. However, we need to pay attention to the short-term impact of individual major factories' year-end output reductions.

According to the Customs, China PET chip export volume totals 456kt in Oct 2023, y-o-y rising 32.9%, including 80.5kt for HS code 39076910, y-o-y up 35%, and 375kt for HS code 39076110, y-o-y growing 32.4%. Combined two HS codes, the actual export volume of PET bottle chip in October is estimated to be around 400,000 to 410,000 tons, a significant increase from the same period last year. The probability of the annual export volume reaching the level of about 4.7 million tons in 2023 is increasing.

However, several PET bottle chip factories have indicated that although the export order situation has shown a clear improvement, the proportion of new orders for 2024 is not small. This is partly due to the market's weak future expectations, cautious overseas customer purchase behavior, and frequent exchange rate fluctuations. Chinese PET bottle chip enterprises consider that the export price's exchange rate risk in the long-term is enormous, so the price space they can offer is relatively limited. On the other hand, given the stability of future raw material supplies, most overseas customers have already determined their contracts for the new year.

Overall, with the end of the Spring Festival holiday and the annual turnaround of beverage plants, the delivery situation of PET bottle chip factories in December-January is expected to gradually improve. Although total inventory is expected to keep cumulating, the pace may slow down, and factory inventory is poised to gradually shift to the trader or downstream sectors. With regards to new capacity, by end 2023, we need to observe the launching progress of Yisheng Hainan 600,000 tons, Tunhe 100,000 tons, Tunhe 600,000 tons, and Yipu 120+300 tons capacity. However, significant supply impact on the market may not occur until early next year. In the short-term, with no significant fluctuations in upstream raw material costs, PET bottle chip prices are expected to continue to maintain a range-bound. Looking at the medium-term, as supply from new capacity and restarting plants gradually release, the competition for the PET bottle chip market share may intensify. Due to the continued temptation of long-term large orders by downstream major factories, some bottle chip factories may consider reducing profits to maintain their market share.