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Insight | Time:May 24 2018 2:10PM
China PET bottle chip supply tightness may persist within short
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China PET bottle chip producers are generally taking Jun-Jul orders for domestic market while Jul-Aug orders for export. But as Chengxing’s 600kt/year line commenced and Liaoyang Petrochemical 100kt/year line restarted, market players began retreating to sidelines. Trading atmosphere flattened. Meanwhile, since mid-May, some PET sheet and small-medium blowing plants ceased production due to over quick rise in feedstock cost, or turned to produce bright chip.

How long is the high pricing gonna sustain? Some market players predict Jun to see consolidation, primarily on concerns of new capacity expansion to increase market supply. Some consider current trend to persist till the third quarter, but it’s based on supportive demand and factories all take full orders. We think late Jun-Jul is a reasonable time frame, since Far Eastern’s 400kt/year new PET resin line in Vietnam is to commence in Jun and 360kt/year line (original M&G’s) to restart in U.S. in Jul.

Figure 1. PET bottle chip capacity expansion/restart
Producer Country Capacity (kt/year) Time of up
Chengxing China 600 Early May
Sanfangxiang China 500 End Jun
Liaoyang Petrochemical China 100 H2 May
Far Eastern New Century Vietnam 400 Jun
Far Eastern New Century U.S. 360 Jul

Currently, materials from Chengxing’s 600kt/year line are available, but viscosity side still needs some improvement. Chance is slim within short for Chengxing to hit in the market, as so far primarily small-medium plants are trying. SFX is expected to postpone to end Jun. Liaoyang Petrochemical also requires a while to provide quality materials and they temporarily plan to run for one month only. Thus, supply increase is discounted, but with new capacities running more steadily, supply increase will exert their pressure.

Figure 2. Some overseas PET bottle chip plant operating status
Producer Country Capacity (kt/year) Remark
JBF Belgium 400 Force majeure
India 200 Acquired
UAE 360 Shut down
OCTAL Oman 1000 50%
EIPET Egypt 215 Long-term shut
Sabic Saudi Arabia 450 Shut down

JBF 400kt/year PET resin line declared force majeure on feedstock shortage. Delivery may get impacted in short term. Sabic in Middle East also shut for a long while, JBF UAE unit remained shut and Octal has oversold its materials but been running at 50%, and EIPET didn't show any sign of restarting. So orders from Saudi Arabia, UAE and Egypt increased in Mar-Apr (refer to import and export data). So far, well not be forthcoming. Though some to be online capacity may ease the tightness, market needs time to accept new supply which shall be a long while. For some customers that don't have high requirement, pricing could solve many problems.

In all, China PET bottle chip market is projected to fare stable-to-strong within short. In medium-long term, China even global supply will lift as new capacity come on stream and shut plants restart, exerting downward pressure

$1=RMB 6.4
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