As PET bottle chip production facilities gradually restarted around the National Day holiday, market supply has significantly rebounded. According to CCFGroup statistics, the commissioning of two 750,000-ton plants by Sanfame and a 500,000-ton facility by Yizheng has been postponed until the end of this year or early next year, which means that there will be no new facilities coming online before December. However, since late September, the PET bottle chip industry has been recovering production, including a 500,000-ton restart at Yisheng Hainan, a 2 million-ton short halt at Sanfame, an increase in O/R at Wankai Zhejiang and 300,000 tons in Chongqing, along with restart of 550,000 tons at Far Eastern Shanghai and 350,000 tons at Billion. This has raised the average domestic PET bottle chip facility utilization rate from around 74-75% to nearly 89-90%, with further increases expected later. Overall estimates suggest that the monthly production of PET bottle chip in October is expected to soar to around 1.49-1.50 million tons, setting a new monthly production record, which represents a year-on-year growth of about 35%. Currently, there are only about 1.1 million tons of new maintenance plans announced for the fourth quarter by China Resources.

On the demand side, the overall performance in the first three quarters has been commendable. Preliminary statistics indicate that domestic bottle chip demand in the first three quarters of this year was around 6.88 million tons, with a year-on-year growth of over 15%. Notably, the consumption of PET in the beverage sector has rapidly increased by nearly 30%. This is partly due to many beverage companies launching new projects in the past two years, as well as a significant growth in demand for essential materials. However, intensifying market competition has led to declining profit margins for some enterprises, and the price war has widened the gap in market share among different players. In terms of exports, export order intake in Q1-Q3 shows that the contribution to industry demand has surpassed domestic sales, with total orders from January to September reaching 4.29 million tons, an increase of 1.20 million tons or 38% compared to the same period in 2023. Shipments have also seen a year-on-year increase of around 30%. Consequently, against the backdrop of substantially increased sales volume and reduced supply, PET total inventory successfully shrank to around 1.5 million tons by the end of September, down nearly 200,000 tons compared to the end of last year.

However, the previous trading volume was largely driven by prices falling to their lowest levels of the year, with many end-users completing their 2024 purchases early, and some even starting to procure raw materials for 2025. Thus, after the recent upward price movement, the overall market response on the demand side has been moderate. Notably, many traders' clients are medium to small-sized enterprises that are highly price-sensitive, preferring to buy when prices rise rather than fall. This has been a primary reason behind the continued decline in PET bottle chip prices post-National Day and ongoing compression of processing spread.

Therefore, despite the reasonable destocking scenario observed in the bottle chip factories during the first three quarters, as new supply volumes enter the market following facility restarts in October, it is anticipated that market processing margins will be further compressed to earlier low levels. Additionally, with the rise in the demand base in the first half of next year, there is a possibility that overall demand growth may be constrained, potentially pushing total inventories higher. Naturally, at that time, the futures contract for March will also face delivery, and the effectiveness of the futures as water reservoir remains to be seen.

In summary, although this year has seen demand growth exceed expectations, concerns about demand growth for next year are likely to pose certain risks, and the issue of supply surplus has yet to be effectively resolved. Moreover, it cannot be ruled out that some major PET bottle chip manufacturers may continue to operate at high rates, thus squeezing the survival space of small and medium-sized enterprises.

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