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Insight | Time: May 10 2019 4:14PM
PET bottle chip moving trend after breaching below 8000yuan/mt
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PET bottle chip price continuously declined recently, though spot feedstock retained firm. Trading volume expanded moderately at low rates post-holiday as price rapidly moved below 8000yuan/mt, and cash flow also shrank to near breakeven line.

How will the market evolve then after price retreats to 7000 line?

In terms of supply and demand, PET bottle chip market pattern changes little. Though factory stock piles a bit, rigid demand is tolerable and early order is numerous. Delivery appears smooth and factory stock hovers near half month. So far, producers largely take Jun-Jul orders, with few stilling accepting May orders. Some large plant even arranges delivery to Aug-Sep. In export side, Jan-Apr export order of PET bottle chip totals 1.01 million tons, rising 60kt on year, rendering certain support to later delivery, but orders to be delivered is declining rapidly.

It’s a good chance for large plants to restock PET bottle chip when its price is low and PET feedstock is steady. Soft drink and edible oil producers have started procuring PET bottle chip since late Apr, and stock generally stands around half-to-one month, to be delivered in Jun-Aug. Traded price declines from 8600yuan/mt to 7800yuan/mt by cash EXW. Some large downstream plant is refilling Q3 PET resin while some downstream plants with prudent views mainly build stock on need.

Small-medium plants refilling activities are not active as large ones. Amid a bit bearish expectation over demand, PET sheet factories operating rate kept at low level in Apr-May, with Zhejiang and Jiangsu O/R averaging at 60-70%. Since capital was possessed by early PET stock, coupled with risk of high PTA spot processing spread, speculative demand by end-user has been constantly slack after Mar. As a result, dealers suffered. Particularly the round of rapid decline previously, has entangled a spate of traders

As price dropped too quickly, some traders or downstream players generally delayed to implement contract. That explains why PET resin factories have a lot spot goods available currently. If Q2 situation doesn't see any improvement, order reduction may exert obvious pressure on domestic sales. By then, more PET resin producers may cut down output to ensure cash flow not falling too much.

In all, PET bottle chip domestic sales still face pressure in May-Jun, due to continuously shrinking export order intake coupled with new capacity expansion. Shortly, considering a spate of downstream plants restocked after prices fell lower, PET bottle chip factory stock level may keep steady, with limited upward space. Prices is likely to hover at low rates. In Jun, players could eye on output cut plans. In medium-long run, focus shall rests on whether exports could recover or not, capacity launch progress, as well as whether raw materials cash flow could preserve high.

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