Why do China PET bottle chip plants sharply raise prices ?

Last Friday, the large PET bottle chip factories significantly raised its prices, with some units suspending their quote. In fact, the PET bottle chip factories have been operating at a loss for a long time and are currently selling below cost.

PET bottle chip factories have also been gradually increasing their production shutdown plans. Apart from previously announced shutdowns such as Yisheng Hainan's 750,000 tons, Wankai Zhejiang's 650,000 tons, CRC Jiangyin's 600,000 tons, Anyang Chemical's 300,000 tons, other bottle chip factories like CRC, Sanfame, Far Eastern, and Sinopec Yizheng have hinted at additional shutdowns or conversions. Overall, the anticipated total shutdown capacity may approach 4 million tons.

At the same time, the market is closely monitoring the progress of new capacity expansions, with some expansion timelines potentially facing further delays. Current third-quarter expansion plans include Yisheng Hainan's 600,000+600,000 tons, Sanfame's 750,000 tons, Hanjiang's 300,000 tons, and Yizheng's 500,000 tons, a total of 2.75 million tons. Therefore, if the new capacities are launched as planned, the decline in average operating rates at PET bottle chip factories may be relatively limited. Conversely, delays in new capacity expansions, coupled with planned shutdowns, could provide a breathing space for PET bottle chip factories in July.

Based on CCFGroup initial estimates, domestic PET bottle chip factory output in the first half of the year was around 7.47 million tons, with domestic demand near 4.37 million tons and exports estimated at 2.85 million tons (comprehensively deduced based on tariff numbers 39076110 and 39076910). Hence, around 250,000 tons of excess PET bottle chips were produced in the first half of the year, which is not considered excessive for the current industry. However, due to an average operating rate of less than 85% in the first half of the year, nearly 2.5 million tons of capacity remained underutilized, and this number is expected to reach around 6 million tons by the year-end. Therefore, in terms of the overall supply-demand scenario by year-end, about one-third to half of the current capacity in the PET bottle chip industry may not find corresponding demand to fill. Hence, reducing the surplus circulating in the market is essential, otherwise, price increases may remain wishful thinking.