FocusNo danger of China PET flood post-Games

By Hong Chou Hui

SINGAPORE (ICIS news)--Polyethylene terephthalate (PET) bottle chips from China are not expected to flood non-Chinese markets after the Beijing Olympics in August on the back of planning and preparations for demand generated by the event which began one year ago, said producers and downstream end-users on Thursday.

Industry sources have estimated that the Olympic Games would trigger an additional 10% growth in China’s PET bottle chip demand, in addition to the country’s usual 10-20% increase in annual PET bottle chip consumption.

Market watchers, have, however capped the surge in requirements for PET bottle chips at a more conservative 6%, despite the sweltering heat and high temperatures associated with the Chinese summer.

Chinese producers moved to allay fears that non-Chinese markets would be awash with their PET bottle chips after the Beijing Olympics in the eventuality that their additional wares were not utilised.

“Even if the visitors during the Olympics don’t consume a lot of drinks, the Chinese people will need the beverages because summer temperatures are a killer. In the coastal provinces which get sea breezes, temperatures hover around 40 degrees Celsius so a lack of fluids is tantamount to asking for heat stroke,” said an executive from Sinopec in Mandarin.

The appreciation of the yuan to new highs against the dollar in recent weeks had also weakened margins for Chinese exporters, making the alternative of shipping excess PET bottle chips to foreign markets less attractive as compared to a year ago, said a maker based in the eastern Chinese province of Changzhou.

“China has an annual capacity of 3m tonnes of PET bottle chips. Domestic consumption currently accounts for 1.8-1.9m tonnes and this number doesn’t even include the need generated by the Olympics,” said an executive from Far Eastern Textile’s Shanghai office, in Mandarin.

“We crunched the numbers and did our sums after Lunar New Year in 2007 before ordering our feedstocks purified terephthalic acid (PTA) and monoethylene glycol (MEG), to prepare for the production of additional PET bottle chips,” the Far Eastern executive added.

He said that no new capacity was added to the Taiwanese PET bottle chip producer’s two PET facilities in Shanghai and Suzhou in eastern China with a combined annual output of 340,000 tonnes to meet the demands of the world’s largest athletics event.

“From what I know, the Chinese producers utilised a combination of running their plants above 100% and building up their inventories during the first two months of the year which are also the traditional lull season for PET bottle chips,” said a Korean trader.

The care exercised by Chinese PET bottle chip makers in planning production for the Beijing Olympics also spilled over to their downstream end-users in the beverage sector.

“We considered the Olympics demand early this year so that we could prepare the volume of PET bottle chips to be purchased. There has been a definite increase in our requirements for PET bottle chips as compared to 2007,” said the purchasing manager of Nongfu Spring, China’s largest producer of spring water, in Mandarin.

Deals for PET bottle chips from China were concluded between $1,390-1,410/tonne (€875.70-888.30/tonne) free on board (FOB) China for the week ended 11 April from the previous week’s level of $1,370-1,400/tonne FOB China, based on global chemical markets intelligence service ICIS pricing.

PET bottle chips are used to manufacture bottles for consumer goods such as drinking water and cooking oil while PET fibre chips are utilised for making polyester fibres used for stuffing toys and cushions.

Major PET producers in Asia include Reliance, SK Chemicals and Indorama.

($1 = €0.63)

Judith Wang and Tina Liu contributed to this story.

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