ICIS: polyester bottle flakes tight balance will continue

So far this year, the petrochemical market has been filled with expectations of a global recession. In the Asian petrochemical market, including China, many petrochemical products this year, profits continue to be low. However, a recent report released by ICIS shows that the Chinese polyester bottle flake market has surged and has been profitable since the fourth quarter of last year. The reason for this is mainly the recovery of domestic demand, combined with the export market is hot. The agency expects that this year's follow-up bottle flake market shortage degree is not as good as the first half, but still maintain a tight balance, so the bottle flake factory profits will remain high. However, the price difference between the bottle and the raw material may be slightly lower than the first half.

ICIS analysis, domestic demand, since last year, China's beverage industry production and sales basically on track. According to the National Bureau of Statistics, from January to July, the cumulative retail sales of food, beverages and alcohol and tobacco grew 11% year-on-year. Meanwhile, this summer's hot weather brought higher beverage demand and the beverage industry was able to de-stock. It is expected that there will be a cycle of active accumulation of stocks at the end subsequently.

In terms of bottle exports, China is the largest exporter in Asia, and the cumulative exports of Chinese bottles increased significantly from January to July, with the main export regions being Russia, Philippines, Turkey, Algeria, UAE and so on. At the same time, from the increase in the main export places, the increase mainly from Turkey, Colombia, Italy, Peru, Algeria, etc.. Among them, this year's exports to Turkey increased by 8 times; Colombia increased by 4 times, Italy increased by 4 times. Overall, the main export increment direction this year is the Middle East, Latin America and Europe.

ICIS research found that China's exports to the above-mentioned regions increased significantly, the fundamental reason is the shortage of goods in the U.S. and Europe. ICIS expects that in the subsequent time this year, the shortage of bottles in the U.S. will be alleviated, but the supply of bottles in Europe will still have a large bottleneck due to energy problems, and still rely on Asian imports to meet local demand.

In terms of China's domestic demand, ICIS believes that the current low inventory of beverage factories, the follow-up on the bottle stockpile is expected to last until the fourth quarter. In addition, the "November" Golden Week will, to a certain extent, promote beverage consumption. ICIS expects China's bottle demand to increase steadily in the second half of 2022 compared to the first half.

Combining domestic demand and exports, ICIS expects the bottle flake market to maintain a tight balance in the second half of 2022, but shortages will improve slightly compared to the first half due to reduced demand for U.S. imports. On the supply side, the agency estimates that less new capacity will be put in place in the second half of this year. The agency also expects that subsequent Chinese bottle flake prices will still have room to fall due to the trend of raw materials, but the bottle flake industry maintains considerable profits due to the limited supply of spot in the market and factories still have strong bargaining power over terminals.

However, ICIS believes that in 2023, European bottle flake units will resume production and reduce imports from other regions. In addition, with the gradual release of new capacity in China starting in the first quarter of 2023, the bottle flake market will no longer be in short supply and industry profits will decline.