China R-PET outlook weak on fears of long supply, weak demand

Focus article by Hazel Goh

SINGAPORE (ICIS)–Chinese buyers expect recycled polyethylene terephthalate (R-PET) market is going to weaken on concerns of long supply and weak demand.

Some market participants are expecting R-PET supply to lengthen with the approaching warmer weather in spring followed by summer, which usually means higher collection rate for post-consumer bottles and hence more availability for R-PET flakes.

On the other hand, downstream demand from recycled polyester converters is expected to fall since it is the seasonal lull period for their end-products.

Some R-PET buyers said they had noticed an obvious drop in their downstream sales orders in the month. Hence, buyers are not in a hurry to buy R-PET flakes.

“We continue to run our operations at steady rate, however there will be less urgency to buy equal volume cargoes regularly during the lull demand period,” a major Chinese downstream recycled polyester manufacturer said in Mandarin. 

“We can rely on our inventories for operations, and adjust our purchase volume depending on prices if they match our expectations. Buying at higher prices, only means a bigger financial strain as some of the current production will go into the end-product stock inventory since sales is lower than production during the seasonal lull demand,” the manufacturer added.

Smaller recycled polyester manufacturers typically will lower their operating rates during the lull demand period as they have small storage space. This would mean their demand for R-PET flakes is reduced during this period too. 

Lately, prices in the related virgin PET market in China were on a downtrend as well amid volatile feedstock PTA and MEG prices, further dampening market sentiment in the R-PET market.

Recent drop in upstream crude prices have also added on to the bearish sentiment in the R-PET market with buyers expecting lower R-PET prices to come in April.

Offers of southeast Asian hot-washed clear/white R-PET flakes were at $720-750/tonne CFR (cost & freight) China, dropping by around $50/tonne from the last official offer level two weeks ago.

For Taiwan-origin hot-washed green R-PET flakes, sellers’ workable level dropped $60-70/tonne to $540-550/tonne CFR China for April shipment, as compared to March shipment prices.

Sellers were not confident that these prices will translate into deals, and true enough buying interest was limited at these prices.

According to ICIS data, assessed spot prices of hot-washed clear/white flakes were at $710-750/tonne CFR China and blue/green flakes at $540-550/tonne CFR China in the week ended 21 March.