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Insight | Time:Aug 8 2018 1:45PM
PET bottle chip offer above 10000 again, what's the future trend?
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PET bottle chip offer rebounded above 10000yuan/mt Aug 6, however, traded price didn't track up, which means this round of rise is forced up by surging polyester feedstock. How will PET resin market evolve later on?

The polyester industry chain is now in the stage of profit redistributing. Previously, polyester feedstock was hemmed into tight range, except for MEG that showed more fluctuation, PTA saw rare change in the first half of 2018, which generated downstream huge profit space. Meanwhile, we shall recognize that major polyester feedstock--PTA fundamental was not bad, on the contrary, due to constantly high polymerization rate, PTA inventory level has been declining since Q2.

Then why PTA didn't rise in previous stage? On one hand, players held soft views toward polyester demand. On the other, PX-PTA spread was tolerable, which didn't require PTA producers to interfere. Later, rapidly hiking PX and depreciating RMB weighed on PTA plants to bear more losses, which is partly due to over high PX import dependency. Meanwhile, panic emotions over surging cost on exchange rate volatility began to prevail in domestic market, not chemical fiber sector alone. This also made PTA futures performance deviating from some players’ expectation.

With PTA price soaring, downstream resisting sentiment is increasing, helping restricting PTA up momentum. Later on, whether retreat or not depends on downstream output cut condition.

In terms of PET bottle chip supply and demand, low rates turnover was tolerable in July as a spate of capacity were shut in Jul, and newly launched units had limited impact on the market, plus markedly retreating prices. Delivery maintained smooth, and PET resin stock level inched lower. Entering Aug, we can obviously feel that PET bottle chip market is confronted with increasing supply and flatter demand. So far, PET bottle chip order intake merely extended to mid-late Aug, excluding few plant to Q4. Thanks to well performed domestic sales, factory pressure remained not large. It indicates that restocking in Aug is of big chance. Amid over quick rising polyester feedstock and squeezing cash flow, PET resin producers are more likely to reduce output to preserve margin later on.

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