Will the O/R of PET bottle chip factory recover to over 80% by the end of March?

With the restart of Yisheng Hainan and Dragon Special Resin, and aside from a few short downtime incidents, the average operating rate of domestic PET bottle chip facilities is gradually rising to around 77% (based on a designed capacity of 20.93 million tons per year), and the average inventory at factories has also decreased to slightly above 15 days. So, is it possible for the average O/R of PET bottle chip facilities to recover to over 80% in the future?

Firstly, this round of inventory reduction is mainly driven by bottle chip factories actively lowering prices to stimulate sales. According to CCFGroup statistics, from late February to mid-March, the transaction volume in the domestic PET bottle chip market reached nearly 1.25 million tons, with two-thirds of this volume for Mar-Apr delivery. This indicates that the delivery speed for contract traders and end customers is gradually accelerating. However, it cannot be denied that this increase in transaction volume has come at the cost of creating new lows for the year. If upstream raw material costs rebound significantly in the future, bottle chip factories may face the risk of losses on earlier orders if they do not lock in costs in a timely manner. This is evident from the fact that some bottle chip factories have increased their low-level raw material purchases recently. Therefore, if there is a reversal in the raw material sector, it may indirectly delay the restart of some facilities that have reduced or halted production.

Secondly, current statistics indicate that facility restarts and shutdowns are occurring simultaneously. In mid-March, Yisheng Dalian's 700,000-ton facility has a planned shutdown for maintenance. If this is executed, it would essentially offset the restart of 600,000 tons at its Hainan plant. The restart time for Sinopec Yizheng's 500,000-ton facility and Wankai Zhejiang's 550,000-ton facility are expected to be around the end of March, while the remaining 500,000-ton facility at Yisheng Hainan has no scheduled restart time yet. Additionally, whether the 750,000-ton new capacity at Sanfame, which was previously shut down, can smoothly come online in the second quarter is also worth monitoring. Given this situation, it seems unlikely that the operating rate of PET bottle chip factories will reach over 80% before the end of March. It is expected that the O/R may only begin to recover to over 80% starting in April (based on a designed capacity of 20.93 million tons per year).

Looking ahead, PET bottle chip factories are expected to continue a pattern of inventory reduction until the end of March. Starting in April, with the gradual return of maintenance facilities, the market supply is expected to progressively rise to pre-Chinese New Year levels. Attention should be paid to the continuity of order intake and the pickup speed from downstream end users. Of course, if PET bottle chip factories continue to face significant losses in the future, they may consider reducing production to maintain prices after receiving sufficient orders during the peak season. We speculate the timing around late June or July.