PET Bottle Chip Stabilizes on Plants' Rational Operation

In Dec, PET bottle chip fluctuated within a reasonable range of 11600-11800yuan/mt by cash, ex-works. As it was close to year end (besides, producers were running at low capacities), bottle chip plants kept prices around or slightly above cost line. However, buyers were still in looking-on mood due to dull season and relatively high prices. Therefore, the market was deadlocked. Faced with such situations, there was limited room for traders' activity. 

 

As to supply and demand, rigid demand still existed. Several major beverage plants purchased large amounts of bottle chips last week, which would lead to a decrease in the inventory of bottle chip producers by 4-5 days at least. But small and medium clients were not quite willing to build stocks. Besides, export demand was also in dull season. On a whole, with several plants in South China closed for maintenance and the restart of some major producers, the market was largely balanced as a whole. Still, some plants may receive fewer orders than previous years as bottle chip capacities have expanded in 2010.

The operation of bottle chip plants was rational and the profits were lower than that of other polyester products through this year. Thus some plants shut down decisively for maintenance in unfavorable market situation. On one hand, the production reduction led to lower demand for feedstock. On the other hand, bottle chip supply dropped. Consequently, it brought the market to a balance. That well explains why bottle chip market presented better than other polyester products recently. Bottle chip prices have stabilized around 11700yuan/mt or above. The gap between bottle chip and semi-dull PET fiber chip which kept weakening has enlarged.

In the first half of 2011, there will be no capacity expansion, thus demand and supply may be kept flat with 2010. There was concern that current bottle chip prices were relatively high, at 11700yuan/mt in domestic market and $1460-1470/mt in export market. Only with the support of macro economy and feedstock can it climb higher later. However, prices mean little to producers, it is margin that counts.

According to a recent questionnaire survey by China central Bank toward 20,000 urban depositors in 50 cities, in the 4th quarter of 2010, residents' satisfaction toward market prices were the lowest since the 4th quarter of 1999, the inflation anticipation also thickened; income was basically stable and not expected to increase much in the future; 70% of residents believe that house prices were too high and might continue to climb; households were inclined to transfer savings from deposit to investments (mainly bonds, stocks, funds, etc).

It is still uncertain whether the bottle chip market will reach a new high or slump next year. As the market environment adopts stronger financial attributes, a balanced market is crucial for bottle chip to stay firm. Domestic bottle chip plant can make some breakthrough in several ways: reduce production costs, such as use MTA as substitute of PTA; improve export demand and expand domestic demand.

$1=CNY6.66