Is PET bottle chip demand improving as market transactions continue to increase

Recently, as the downward trend of upstream raw materials has become clearer, the prices of PET bottle chip have once again approached previous lows, with market transactions continuing to increase. On certain working days, transaction volume exceeded 100,000-200,000 tons. So, has the downstream demand for PET bottle chip begun to release? Is the market starting to bottom out?

A large number of PET bottle chip facilities have been shut down, involving nearly 6 million tons of capacity

According to CCFGroup statistics, as of last weekend, the average operating rate of PET bottle chip plants was around 72.1%, calculated based on a designed capacity of 20.93 million tons, while the low point after the Spring Festival was around 71%. Before mid-March, PET bottle chip output reduction remained around 6 million tons, with actual daily production losses exceeding 22,000 tons, accounting for more than one-third of total production. Notably, some large manufacturer had shut down over half of their production, leading to tight supplies of certain specifications post-holiday, which created weak market expectations and difficulties in spot deliveries.

Downstream operations are gradually lifting, and traders short covering activity increases

According to CCFGroup statistics, downstream pick up pace has improved from late February to early March. Last week, the operating rate of downstream beverage companies ranged from 70% to 90%, gradually increasing. In PET sheet sector, O/R in East China region was around 50-60%, while in some areas in South China were around 40-50%, with few still maintaining at around 20-30%. In the edible oil sector, the average operating rate of edible oil companies was around 50-60%, with some slightly higher. From March to April, major downstream beverage manufacturers are expected to gradually operate at full capacity, significantly increasing pickup speeds. Regarding exports, due to Ramadan affecting regions like the Middle East and Southeast Asia, many overseas orders were advanced to mid to late February, and March is expected to see a noticeable increase in export shipment volumes compared to February.

As prices decline, traditional traders are taking profits, and the repurchase of short positions has significantly increased. Meanwhile, large downstream enterprises are increasing their forward purchasing plans for the second and third quarters, leading to a significant release of concentrated restocking demand. According to CCFGroup statistics, just from last week to the beginning of this week, the scale of replenishment in the domestic market has reached 600,000 tons, equivalent to half a month's production of PET bottle chip. Among this, the replenishment volume of near-month spot goods accounted for about two-thirds, effectively alleviating the high inventory pressure faced by some bottle chip producers after the holiday and promoting continuous inventory destocking. In this regard, by the end of March, PET inventory may have a chance to achieve a small destocking target.

However, starting in April, with the gradual restart of previously reduced large production facilities and the anticipated release of some new capacities, the monthly production of PET bottle chip in April and May are expected to reach new highs, likely putting certain pressure on market supply and demand. Market participants are advised to continue monitoring the developments of bottle chip facility changes.

In the short term, the processing range for PET bottle chip in March is expected to slightly expand under the dual support of continued transaction increases and declining upstream costs. However, in the medium term, from April to May, after the restart or increase in O/R of previously shut down bottle chip facilities, the market is expected to face significant supply pressure after a short-term destocking, and the liquidity expectations in the spot market will likely remain loose. Nonetheless, the core pricing of the industrial chain currently hinges on crude oil, and given the recent volatility in U.S. policies, market participants still need to pay attention to geopolitical and macroeconomic influences.