PET bottle chip supply expected to recover

After a round of concentrated production cuts that began in early July, domestic sales volume and processing spread for PET bottle chip have both rebounded. The continuous decline in raw material costs has allowed some brands to stabilize their processing spread around 550-650yuan/mt. Some factory was heard have sold over 500kt PET resin.

From late August to September, the domestic market is likely to see a wave of new capacity coming online, including 600,000 tons from Yisheng Hainan, 750,000 tons from Sanfame, and 500,000 tons from Sinopec Yizheng. Additionally, some previously shut-down units at Wankai and Sanfame will gradually restart, with an estimated total of around 2.6 million tons of bottle chip capacity involved. As market supply recovers, the average operating rate of PET bottle chip plants is expected to return to over 80% by early to mid-September. However, since it takes time for new units to start producing and enter the market, the actual impact may not be felt until late Q3 to early Q4. If PET bottle chip factories are already fully booked or have oversold a certain volume of orders during this period, it could result in a temporary tightening of supply for specific grades in the spot market, as evidenced by recent market traders selling spot goods at prices nearly 100yuan/mt higher than those for later months.

On the export front, the RMB exchange rate showed an overall appreciation trend from July to August. PET bottle chip factories are becoming increasingly cautious in accepting export orders, leading to a more conservative overall order intake. However, due to a significant number of to be delivered orders, the actual export shipment volume in August is expected to continue exceeding the monthly order intake, similar to last month. In July, order intake slightly surpassed 400,000 tons, but customs data indicates that shipments exceeded 500,000 tons.

Considering the current shipping situation for both domestic and export markets, the estimated total inventory for August is expected to be revised downwards, likely adjusting from just over 1.7 million tons to slightly above 1.6 million tons. In September, while total inventory is not expected to accumulate, the increase may be limited to within 200,000 tons.