Substitution of Recycled PFY and Virgin PFY; Profit-driven

Last year, margin of re-PFY production was highly lucrative, which had driven many plants, including many former virgin PFY producers, to invest upon the sector. However, the profitability started to change this year as you could see from the following charts:






The expansion of re-PFY in H1, 2010, ballooning output intensified competition, making more and more re-PFY producers lower price. Meanwhile, the high-priced recycled bottle flakes, driven by tight supply, also eroded the profitability of re-PFY. Under this situation, many re-PFY producers began to turn to virgin PFY production, in a different direction compared with last year.

However, things again changed somewhat as margin of virgin PFY production narrowed a little, mainly because of shrinking downstream demand caused by "power saving, production cutback" policy and somehow because of its increasing capacity after transformation of many re-PFY units into virgin PFY ones. In the future, re-PFY will lose its price advantage with the narrowing virgin PFY and re-PFY spread. The two will fight for their own market shares.