PET bottle chip faces short-term pressure for inventory digestion

The years 2023-2024 mark a significant period for the PET bottle chip industry, with new capacities planned to exceed 10 million tons. However, due to intense competition within the industry and a noticeable compression of profits, many expansion plans have been postponed or shelved. According to CCFGroup statistics, from 2023 to end Q3 2024, a total of 7.72 million tons have been put into production, achieving approximately 70-80% of the planned capacity over the two years.

In terms of capacity expansion ratio, Yisheng and Sanfame have been the major contributors during these two years. Yisheng has newly invested 1.4 million tons in Dalian and 1.8 million tons in Hainan, totaling 3.2 million tons, which accounts for 41.5% of the total capacity expansion. Sanfame has newly invested 1.5 million tons, representing 19.4%. Together, these two companies account for approximately 61% of the total capacity of 4.7 million tons. Other facilities include 600,000 tons from Chongqing Wankai, 300,000 tons from Sichuan Hanjiang, 600,000 tons from China Resources Jiangyin, 700,000 tons from Fujian Billion, 100,000 tons from Xinjiang Tunhe, 120,000 tons from Xinjiang Eplastmer, and 600,000 tons from Anhui Haoyuan, totaling 3.02 million tons.hr_wordimg_1733471237540_69836.png

While capacity is expanding rapidly, the PET bottle chip industry has also witnessed the shutdown, conversion, or elimination of some older facilities. According to CCFGroup statistics, facilities that have been permanently shut down (for more than three months) in 2023-2024 include 250,000 tons from Pan-Asia, 150,000 tons from Baosheng, 800,000 tons from Sanfame, 300,000 tons from Anyang Chemical, 600,000 tons from China Resources Jiangyin, 350,000 tons from Billion, and 300,000 tons from Haoyuan. Facilities that frequently switch between producing PET fiber chip and PET bottle chip include 250,000 tons from Wankai and 150,000/250,000 tons from Sinopec Yizheng, with Liaoyang Petrochemical 100,000 tons having switched to producing film grade PET chip earlier stage. When combined, these total approximately 3.25-3.35 million tons, accounting for about 16-17% of the current total capacity. Thus, while some major PET bottle chip manufacturers are operating at high capacity, many bottle chip facilities remain dormant and are forced to shut down, accelerating the industry's process of elimination.

As of now, it is understood that there is still a probability of operation for a 750,000-ton PET bottle chip facility from Sanfame by the end of 2024, which is said to be heating up currently. In 2025, the production of PET bottle chips is expected to gradually enter its final phase. According to our statistics, the new production plans for 2025 include 750,000 tons from Sanfame's No. 2 facility, 500,000 tons from Yizheng Sinopec, and 600,000 tons from Fuhai, totaling 1.85 million tons (if the production of Sanfame's No. 1 facility is further delayed, this would amount to 2.6 million tons). Other delayed or temporarily shelved production plans include 300,000 tons from Sichuan Hanjiang, 200,000 tons from Tiansheng, and 300,000 tons from Yipu, which carry significant uncertainty and are currently not included in the new production plans.

Looking ahead, although the expansion pace is expected to gradually slow down, the significant increase in supply over the past few years means that the PET bottle chip market is likely to continue facing surplus pressures, raising concerns about whether the industry can self-regulate its supply and demand dynamics. In the short term, on one hand, the PET bottle chip demand is in off season, with most orders from major downstream manufacturers scheduled for delivery next year, offering little assistance to the near-term inventory of bottle chip factories. The speed at which beverage factories take delivery is one of the main factors that has historically influenced whether the market price of PET bottle chip can find support. On the other hand, from the perspective of total inventory, the inventory pressure in the intermediate links has now reached near historical highs, and the turnover rate is not high, with a relatively abundant selection of alternative brands in the market. Even if PET bottle chip factories experience a temporary increase in transactions, market prices have not shown significant fluctuations most of the time. Meanwhile, as the end of the year approaches, bottle chip factories are urging traders to take delivery, which has increased the financial pressure on some traders and stockpilers. Thus, while bottle chip factories are pushing traders to take delivery to gradually realize profits from earlier orders, traders, in an effort to minimize cash flow losses, tend to delay restocking until the end of the month or the beginning of the next month, which effectively does little to help digest inventory. At the same time, due to financial constraints and pressure to fulfill contracts, many traders are resorting to price promotions to liquidate inventory, which has also contributed to a downward trend in market prices.