By Zhang Aihua, Transportation & Sales Centre of Tianjin PC

In 2017, the polyethylene terephthalate (polyester or PET) chip market was impacted by weak commodities, high factory inventories and low raw material prices. PET chip prices fluctuated narrowly in Q1, dropped slightly in Q2, rebounded in Q3 and fluctuated again in Q4.

More new capacity in the future

   As of the end of 2017, China's PET capacity was 53.22 million t/a, with a supply of 47.85 million tons. There are more than 170 producers, mainly located in coastal provinces and cities such as Zhejiang, Jiangsu, Shanghai, Fujian and Guangdong. Refer to Table 1 for China’s major PET producers of 2017.

Table 1  China’s major PET producers, 2017

   PET capacity in China will increase significantly. According to rough statistics, in the second half of 2018, five units will be completed and put into production, with a combined capacity of roughly 3 million t/a. If new units are put into operation as planned, China's PET capacity will reach 60 million t/a in 2019.

Textile industry is still the main driver

   In 2017, China's PET production was 53.22 million tons, a year-on-year increase of 13.25%, and apparent consumption reached 34.57 million tons, up by 18.49 million tons since 2014.
   PET is used mainly to make polyester fibers, bottles, films, and engineering plastics. Among these, polyester fiber is the largest. With the improvement of PET recycling and processing technologies resulting in higher product quality, some recycled PETs like cotton-based special white staple fibers, three-dimensional crimped hollows, and recycled polyester filaments now compete with virgin PET products. The price difference between the primary products and recycled product is continually shrinking, providing a good chance for the development of the recycled PET industry. Hence, the development of virgin PET fiber will gradually slow down. In 2017, China produced 41.64 million tons of polyester fibers, a YoY growth of 17.8%.
   In 2017, China produced a total of 197.80 million tons of soft drinks, a YoY increase of 6%, much of which was polyester bottle packaged drinks. The rapid growth of soft drink consumption will accelerate the growth of PET consumption. In addition, more and more PET bottles are used to package liquor, edible oils, spices and cosmetics. The manufacture of bottle chips is expected to be the fastest growing use of PET.
   The respective demands for polyester film multi-layer packaging materials and solar cell panel films are also large. Polyester films, with continually improved performance, can replace BOPP film in some sectors.
   PET can be blended with PC, PA and PBT to form an alloy which is widely used in electronic and electrical fields due to its good strength and insulating property. The demand for PET in making this alloy will grow rapidly. China’s PET consumption pattern in 2017 is shown in Chart 1.

Chart 1  China’s PET consumption, 2017

   Demand for textile fibers will continue to grow rapidly in the future, supported by economic and population growth and the restricted supply of natural fibers. So the development of the textile industry will remain the main driving force for the development of PET. Good packaging materials such as polyester bottles and polyester films will be widely promoted. The use of polyester bottles in packaging liquid products will develop rapidly. Also, development of some new materials has boosted the demand for polyester films, such as solar cell panel films, electrical and electronic insulation films, liquid crystal display reflective films, and heat shrink films. By 2019, PET demand in China is forecast to reach 53.5 million tpy.
   China is a net exporter of PET. In 2017, the export volume of polyester chips was 316 989 tons, and the export value was US$330 million. As the domestic polyester chip supply has been excessive recently, exports have increased year by year.

Forecast

   Although China's PET production capacity has increased significantly, the units are usually small, inefficient and costly to operate, making them less competitive. Most companies can produce only common products, and many high-tech, multi-functional and high-value-added products still must be imported.
   Polyester direct spinning, thanks to some advantages such as lower cost and energy consumption, has better opportunities for development than chips. Due to environmental pressure and the capacity-reduction policy, backward PET chip units have gradually been eliminated. The polyester chip industrial chain is still sensitive to weaknesses in downstream markets. The whole polyester industry is reshuffling.
   In the second half of 2018, with the expansion of polyester capacity and the emergence of markets such as India and Southeast Asia, China will not be able to compete only by a low price advantage. It is necessary to adjust the product structure, transform and upgrade the industry, and increase competitiveness in the international market.