Weak Demand Pressure Clearly Evident, Recycled PET May Face Downward Pressure in July

Guide Language ： The United States and Iran have officially signed a peace agreement, and the Strait of Hormuz is gradually reopening. International oil prices have fallen, driving down polymerization costs, while prices of virgin polyester staple fiber and fresh polyester bottle flakes have also declined. The price spread between virgin and recycled materials has narrowed, putting pressure on the recycled market. On the supply side, however, cold-washing plants are facing limited profit margins, with some suspending operations to avoid risks or switching production, resulting in low operating rates and providing some support to supply. Looking ahead, amid the seasonal off-season for the industry, the recycled PET bottle flake market is likely to remain relatively weak in July.

Although the price spread between new and old materials has narrowed somewhat, it remains at a relatively high level compared with recent years.

Virgin material and recycled material are substitutes for each other, and there is a certain price spread relationship between the two. If the spread becomes too narrow, recycled material loses its price advantage and comes under downward pressure; conversely, if the spread widens, recycled material’s advantage becomes more apparent and it gains upward momentum. Recently, however, crude oil and PTA prices have fluctuated downward, dragging polyester chip prices lower. As of June 26, the mainstream price of virgin polyester chips in East China was RMB 6,650/ton, and the price spread between new and recycled materials had narrowed to RMB 1,950/ton. Although the spread has narrowed somewhat, it remains at a relatively high level, so recycled material still has a certain degree of substitutability for virgin material.

Market expectations are low, and operating load is running weakly.

According to statistics from Longzhong Information, as of June 25, the comprehensive operating rate of chemical fiber weaving in Jiangsu and Zhejiang stood at 53.66%, unchanged from the previous reading. The decline in crude oil prices weakened cost support, but partial destocking of grey fabric kept operating rates temporarily stable. At present, weaving orders are showing divergence. On the one hand, autumn/winter fleece-type fabrics have seen a localized recovery, with manufacturers mainly focused on digesting spot inventories and showing weak willingness to add production. On the other hand, orders for conventional autumn/winter and summer fabrics lack support from large orders, with sustainability in doubt, and downstream producers have low willingness to raise operating loads. Overall, the industry is in a weak equilibrium characterized by “localized destocking, overall sluggish new orders, temporarily stable operating rates, and the risk of production cuts,” with the subsequent trend depending on actual order volume growth.

Affected by rainy weather in southern China, prices of post-consumer PET bottles remained high, while prices of recycled PET cold-washed flakes were constrained, leading to severe profit compression and limited production enthusiasm among washing plants. In addition, amid the off-season for textiles and apparel, weak demand was transmitted downstream, weaving operating rates were poor, and order support was insufficient. As a result, recycled chemical fiber plants mainly purchased recycled PET bottle flakes on a just-in-time basis, while small and medium-sized washing plants mostly produced according to demand and proactively reduced operating rates to avoid risks. Operating rates at washing plants remained weak. As of June 25, the operating rate of sampled recycled PET enterprises stood at 41.6%, down 1.6 percentage points from the beginning of the month.

Figure 3 Domestic recycled PET mainstream market specification price trend chart (unit: yuan/ton)

Data source: Longzhong Information

With no support from either supply or demand, recycled PET bottle flake prices are expected to decline.

Overall, the recycled PET bottle flake market may come under downward pressure in July. As the off-season for textiles and apparel deepens, support from essential orders is insufficient. Recycled chemical fiber plants are facing poor production and sales, with a stronger willingness to sell, while their mindset of pushing down raw material purchase prices on dips remains unchanged, weighing on sentiment in the recycled PET market. As for related products, prices of virgin polyester staple fiber and virgin polyester chips are under pressure from polymerization costs and are expected to remain weak. The price spread between virgin and recycled materials is also expected to continue narrowing, further weighing on sentiment in the recycled market. On the supply side, with the arrival of the summer holiday period and increased travel by residents, circulating supply in the post-consumer bottle market is expected to reach the highest level of the year, with prices for post-consumer bottles expected to fall by RMB 100-200/ton. With no positive support from either supply or demand, the recycled PET bottle flake market is expected to move lower under pressure. East China imitation virgin-grade hot-washed white flakes are estimated at RMB 4,500-4,700/ton, while cold-washed blue-white flakes are estimated at RMB 4,000-4,200/ton.