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Insight | Time:Apr 13 2018 2:33PM
Why PET bottle chip hikes in such a craziness
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PET resin offer has marched to 9300yuan/mt and above $1250/mt FOB Shanghai yesterday, meanwhile, producers generally suspended quoting. H2 Jun and H1 Jul materials could be talked lower, but delivery date might face delay.

Reason of the crazy hike is briefed in below.
In Jan 2018, PET resin price moved higher on the back of rising feedstock and shooting up exports, thus downstream refillings were prudent, coupled with not stock built. After the holiday, though price inched lower from 8800yuan/mt to 8300yuan/mt in Mar, players wished it to fall further, hence again not much stock built. With peak season arriving and exports maintaining its momentum in Mar, PET resin uptrend soon resumed end Mar—early Apr and climbed at a crazy speed. Players with scarce stock in hand were forced to chase up. So far, producers are generally taking in orders for Jun delivery, and only few plants are selling H2 May cargoes.

In Jan-Feb, China PET bottle chip exports totaled 373kt (HS code 39076110), up 50% y-o-y. Jan-Feb export order intake surpassed 430kt, rising 26% on year. Exports extended strong momentum in March. According to CCFGroup statistics, single-month export order intake is near 270kt in Mar, hiking 19% on year, which means Q1 exports is to hit historical high, at above 700kt, y-o-y growing 23%. It’s the first time that Q1 export sales take up over 40% of total demand. For some plants, this ratio has risen over 50% in Q1. Besides, Chengold’s 600kt/year and Sanfangxiang’s 500ke/year PET resin lines are delayed, which originally planned to come up in Q1. Thus domestic delivery in Apr-May could be expected to be tight.

Why does export volume expand substantially in Q1?

M&G, JBF, Hosaf,Koksan PET and lotte’s units began to cut output or shut down in the second half of 2017, involving 3 million tons capacity. This big deficit make E.U., African and S. American downstream turn to Asia, especially Chinese mainland (because other regions generally export to U.S. and Japan), and they secured materials ahead of time, typically L/C 90 days, to guarantee seasonal production.

Though JBF ramped up O/R after receiving financial guarantee end 2017, and Hosaf based in South Africa also lifted O/R to 80% after shutting for months on flood issue, some large downstream plants still increased purchases from China, in order to guarantee smooth production during peak season, which could be reflected in the import and export data in Jan-Feb.

Operating status of the mentioned overseas PET units
Company Capacity(kt/yr) Country Operating status
JBF 360 UAE Plan to restart in May
400 Belgium Two line run at 100%
200 India Acquired by Reliance
M&G 1100 U.S. New project, jointly acquired by Indorama, Aplek and Far Eastern
360 U.S. Acquired by Taiwan Far Eastern
550 Brazil Acquired by Indorama
590 Mexico Run at low rat, and may shut recently
Hosaf 240 South Africa 80%
Petroquimica Suape (PQS) 450 Brazil Sold to Petrotemex (DAK/Alpek group)

Issues to concern:
1. With overseas large plants issue sorting out, the units will restart, which is worth close attention. E.U. price level alone has hampered Chinese materials into the market.
2. Completion of M&G acquisition signals bulls from Americas are to diminish.
3. Given Japanese market share is gone, Indonesia is also awaiting to announce anti-dumping result, and whether such surprising export figure will continue is a question.
4. End Q2 early Q3, Taiwan Far Eastern’s 400kt/year PET resin unit in Vietnam will launch. Vietnam’s advantages of no ADD from any country or region, favorable geographic location for shipping and low labor cost, will give rise to its PET sales.

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