PET bottle chip O/R once again drops below 80%, how the future trend looks like?

With the maintenance of Hainan Yisheng's 1.1 million-ton PET bottle chip facility confirmed, the domestic PET bottle chip plant O/R is expected to decline to around 70% mid-Jan (approximately 78.8% based on a designed capacity of 20.43 million tons). By late January, it is projected to drop below the 70% to around 67-68% (approximately 75-76% based on the same designed capacity). The average operating rate in January is expected to be around 70%, which is approximately 78.4% based on designed capacity.

This round of production cuts and shutdowns is similar to that in July, where processing spread fell below 400yuan/ton, triggering a response. However, the difference this time is that the reduction period is influenced by the introduction of new capacity and a more dispersed maintenance schedule, which has relatively limited effects on curbing inventory accumulation. In contrast, last year's third quarter saw a significant inventory reduction due to concentrated maintenance activities. After the Spring Festival, there are maintenance plans for Dragon Special Resin's 250,000 tons and Zhejiang Wankai's 550,000 tons, while Sinopec Yizheng's 500,000 tons of new capacity is expected to gradually increase O/R, and CRC Zhuhai' 500,000 tons facility is planned to restart after the festival. Additionally, considering the severe losses in processing spread, it is reported that some bottle chip plants may moderately reduce their operating rate before the Spring Festival. Overall, the production loss in January and February is estimated to be around 150,000 to 200,000 tons, and by the end of February, total inventory may barely be locked around 3 million tons.

From the recent domestic orders for PET bottle chip factories, due to the proximity to the Spring Festival, market spot trading has been sluggish, and most bottle chip factories have shifted to discussing forward contracts. As prices fell to low levels again earlier last week, transaction volume for Feb-Mar delivery have moderately increased. Currently, some bottle chip factories have secured a considerable number of orders for Q1-Q2 delivery, mostly from large downstream manufacturers. However, the future sales situation will depend on how well end-user factories recover after the holiday. Furthermore, as some major bottle chip manufacturers increased their contract ratios for 2025, the inventory pressure on trading sector may become more pronounced. It is also possible that some bottle chip factories will participate in futures delivery with part of their inventory to alleviate short-term sales pressure.

Regarding exports, the overseas market is gradually returning from the holiday this week. Except for a few major manufacturers receiving orders, overall sales recovery for PET bottle chip factories has not been reported in detail. In terms of inventory, as of last Friday, domestic PET bottle chip factories have an average inventory of around 18-19 days, with some exceeding one month, while some slightly lower at less than half a month due to maintenance. If PET bottle chip factories continue to face significant losses, the probability of being forced to halt production to maintain prices is gradually increasing, and the upward trend in PET factory inventory may slow down, but this depends on the demand side not encountering major issues.