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ICIS: The tight balance of PET flakes will continue

The petrochemical market has been flooded with expectations of a global recession this year. In Asian petrochemical markets, including China, profits for many petrochemicals have remained low this year. However, according to a recent report released by ICIS, China's PET bottle flakes market has sprung up and has been lucrative since the fourth quarter of last year. The reason is mainly due to the recovery of domestic demand and the booming export market. The agency predicts that although the level of shortage in the bottle flakes market this year is not as good as in the first half of the year, it will still maintain a tight balance, so the profit of the bottle flake factory will remain high. However, the price difference of bottle flakes relative to raw materials may be slightly lower than that in the first half of the year.

According to ICIS analysis, in terms of domestic demand, since last year, the production and sales of China's beverage industry have basically been on the right track. According to the National Bureau of Statistics, from January to July, the cumulative retail sales of food, beverages, tobacco and alcohol increased by 11% year-on-year. At the same time, the hot weather this summer has brought higher demand for beverages, and the beverage industry has been able to destock. It is expected that there will be a terminal active storage cycle in the future.

In terms of bottle flake exports, China is the largest exporter in Asia. From January to July, the cumulative export of Chinese bottle flakes increased significantly year-on-year, and the main export regions were Russia, the Philippines, Turkey, Algeria, and the United Arab Emirates. At the same time, judging from the increase in major export destinations, the increase mainly comes from Turkey, Colombia, Italy, Peru, Algeria, etc. Among them, the export volume to Turkey has increased by 8 times this year; Colombia has increased by 4 times, and Italy has increased by 4 times. On the whole, the main export increments this year are the Middle East, Latin America and Europe.

The ICIS study found that China's exports to the above-mentioned regions have grown significantly, and the root cause is the shortage of goods in the United States and Europe. ICIS predicts that the shortage of bottle flakes in the United States will be alleviated in the rest of this year, but the supply of bottle flakes in Europe will still have a big bottleneck due to energy problems, and will still rely on Asian imports to meet local demand.

In terms of domestic demand in China, ICIS believes that the current inventory of beverage factories is low, and the subsequent stocking of bottle flakes is expected to continue until the fourth quarter. In addition, the "Eleventh" Golden Week will promote beverage consumption to a certain extent. Although the demand for the sheet segment may decline due to inflation expectations, this segment accounts for only 15% of domestic bottle flake applications. ICIS predicts that in the second half of 2022, the demand for bottle flakes in China will increase steadily compared with the first half of the year.

From the perspective of domestic demand and exports, ICIS expects that the bottle flakes market will maintain a tight balance in the second half of 2022, but compared with the first half of the year, due to the decrease in US import demand, the shortage situation will slightly improve. On the supply side, the agency estimates that there will be less new production capacity in the second half of this year. The agency also expects that the price of Chinese bottle flakes will be affected by the trend of raw materials, and there is still room for decline. However, due to the limited spot supply in the market, the factory still has strong bargaining power over the terminal, and the bottle flake industry maintains considerable profits.

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

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