PET bottle chip export market review in Q1 2019 polyester microfiber

According to Customs statistics (HS code 39076110), PET bottle chip exports totaled 865kt in Q1 2019, y-o-y growing 30%. However, if adding part of the low-viscosity that was allocated to HS code 39076910, Q1 exports was assessed at 940kt, y-o-y rising 35%.

In terms of export order intake, since PET export price fluctuated violently in 2018 and some regions faced supply tightness, most large overseas plants have negotiated 2019 contract in advance in Q4 2018, which helped boost China PET exports to be 1.53 million tons during Nov 2018 to Mar 2019. Monthly average figure was at 300-310kt, particularly in Nov whose export order intake has exceeded 400kt, hitting historical high. Thus, PET bottle chip export volume to be delivered once reached 800-900kt.

After Spring Festival holiday, China PET bottle chip export value stood firm, supported by the export boom earlier and VAT reduction in Apr, however, overseas demand flattened concerning PX new capacity launch, especially when PTA USD price was cheaper than RMB price. Price spread between China and other regions widened further. Hence since Mar 2019, China PET bottle chip export order intake started to squeeze, and has reduced to below 200kt in Apr, triggering the continuous fall of PET export value.

With feedstock price continuously retreating, China PET bottle chip export value was basically in parallel with other regions, or slightly lower. If raw materials could sustain low rate consolidation or tend stable in May, PET bottle chip export order intakes may improve somewhat.

Looking at China PET bottle chip exports by destination in Jan-Mar 2019 (based on HS code 39076110), market share largely stabilized, and posed a y-o-y growing picture.

In Q1 2019, 31 countries imported over 10kt PET resin from China, up 55% on annual basis. India remains the top importer, with volume and y-o-y growth respectively at 87kt and 107%. Philippines, Russia, Ukraine, Peru, Chili and Vietnam all marked 40% growth. Apart from above traditional export destinations, EU, South Korea and Australia all registered remarkable increase, with y-o-y growth rate at 2-3 digits. Some emerging markets even reach 4 digits expansion in imports.

China PET bottle chip exports by destination in Q1 2018-2019 (based on HS code 39076110, volume surpassing 10kt, unit:10kt)

India’s drastic growth is resulted by local/export supply ratio imbalance. Indian local PET resin producers focused on striving for overseas market share when foreign market suffered supply shortage, and India’s PET resin export share once reached 60%. Since no new capacity was put online in past few years, while local demand rapidly grew, the supply imbalance pushed local downstream to import PET to fulfill their demand. Local dealers and factories once consecutively lowered prices to sell PET, in order to reduce imports, but this didn't last long.

China materials heading to South Africa slumped in Q1 2019. 2018’s periodical imports boom was mainly attributed to local plant shutdown on flood. Now the factory resumes, import order also turns normal. South Africa has initiated anti-dumping investigation against China PET resin, players could eye on the progress. As for Mexico, local imports from China expanded rapidly in 2018 due to M&G issue. After the plant restarted, though O/R not high, its imports from China slipped modestly, apart from some contract volume.

Exports to North Africa and Middle East also saw marginal decrease, mainly because local old units restarted, and they captured most market share through low price. It was difficult for Chinese producers to interfere. Given no accidental incident or local plants don't turnaround, China exports to Middle East and North Africa may feel large pressure.

Of course, there are regions marking drastic import growth. China has become EU’s second major import origin after South Korea since ADD was canceled, despite the 6.5% import tariff. Q1 2019 volume totaled over 100kt, y-o-y up more 65%. Since the FTA signed with South Korea and Australia, exports to the two countries in Q1 2019 grew at 26% and 26.8% respectively on year.

In 2019, still some capacity is to launch in China, but largely in H2 or end year, which exerts little impact on supply. Players could focus more on the 1.7 million tons put online in 2018. Overseas market, JBF and M&G restarted, the supply shortage will vanish and China producers may face more export challenge. But with China’s refinery chemical integration projects coming up, producers will regain price advantage as PET cost may move lower.