PET bottle chip market outlook post-Spring Festival holiday

Recently, the Red Sea situation continues to escalate, and international crude oil fluctuates higher, driving polyester raw material costs to continuously rise, and the market price of PET bottle chip gradually rebounds to a temporary high.

From the current understanding, the pickup speed of PET bottle chip downstream market has accelerated in January, and the overall operating rate recovery pace has been fast before the Spring Festival holiday. Specifically, due to the small peak season expectation during Spring Festival, large beverage factories are currently running at near-full rate, and the delivery speed has also increased recently. However, the operating rate will gradually decrease starting from next week to cope with the Spring Festival holiday.

The situation varies greatly among the PET sheet factories. In East China, the operating rate of some PET sheet companies has climbed to near 80% before the Spring Festival, which is slightly lower in some areas. In South China, PET sheet plants have started to prepare for the holiday around end Jan, and the willingness to replenish PET is weak. As for edible oil factories, due to the expectation of the peak season demand during the Spring Festival, the overall plant operating rate gradually reaches near-full capacity. The trend is similar to that of the beverage industry, which means that starting from next week, they will gradually enter the Spring Festival mode. Looking at the market after the holiday, considering that many downstream plants have built stock before the holiday and the upstream raw material costs may not have enough upward momentum, downstream factories and traders may adopt a wait-and-see attitude. This is worth paying attention to.

Regarding PET bottle chip factory sales, currently the backlog of pending orders is relatively sufficient, especially for exports. Some factories can have a transaction volume of over 10kt on certain working days in January. However, based on the expectation that the processing spread may be compressed after new capacity being put into operation, the current mindset of PET bottle chip factories tends to taking in orders.

From the perspective of delivery pace, it is expected that the inventory of PET bottle chip factories will still be maintained at an average of less than half a month before the Spring Festival, and the inventory during the holiday may increase rapidly, with an average increase of 7-10 days. However, pickup by large beverage factories and some traders is poised to be tolerable after the holiday, hence there is a high probability that the PET bottle chip factories will be destocking in the short term. In addition, before and after the Spring Festival holiday, there will be a round of intensive export delivery. By then, players may need to queue to pick up certain specs in some large plants. However, at the same time, attention should be paid to whether the downstream recovery meets expectations. Based on current situation, PET resin inventory in February is expected to increase slightly compared to the end of January.

Since March, delivery in both domestic and export market will be intensive. For domestic market, traditionally, beverage companies usually promote the sales of fruit juice, carbonated drinks, and other beverages around the first quarter due to the influence of Spring Festival consumption. At the same time, they will also strive to meet their sales targets at the end of the quarter. From April to May, they will focus on bottled water and gradually transfer to end-users, such as supermarkets and retail stores, through distributors. The production volume and operating rate will depend on the sales situation at end-user market around late June. Therefore, the operating rate of water companies may continuously increase starting from March, and some may operate at full capacity. If some new capacity delays startup or old plants arrange maintenance, there is a small possibility that inventory will decrease in March. At that time, market participants need to pay special attention to the delivery situation of factories.

Looking at the equipment side, pay attention to the launching progress of Yisheng Hainan, Yisheng Dahua and Anhui Haoyuan (the two sets of new capacity in Xinjiang are relatively small and may not have much impact on the inland market). Currently, there are no other plans for new capacity in domestic market. However, due to a significant number of capacity expansion previously, it is worth monitoring whether the PET bottle chip factories will schedule some maintenance plans to offset the impact of new capacity.

In summary, the PET bottle chip stock level is expected to slightly accumulate in the first quarter, with no significant pressure on supply and demand. Before the supply from new capacity enters the market, the PET price may show fluctuate widely. In the second quarter, there are not many new capacity expansion plans, but the new supply from Q1 expansion will gradually enter the market. If new order intake are not sufficient, the market sales pressure may gradually increase, dragging down the market price.