Weakened Cost Support Combined with Weak Downstream Demand May Drive PBAT Prices Further Downward

Introduction: The current PBAT market is showing a weak and volatile trend. Cost support has weakened slightly, and the oversupply pattern remains unchanged. Although demand is gradually picking up, overall support remains limited. Corporate profits have improved as raw material prices decline, but the contradiction between supply and demand remains the key constraint on the market. It is expected that in the near term, weakening cost support for PBAT, coupled with weak downstream demand support, may drive PBAT prices to continue declining.

1. PBAT Market prices edged down slightly as supply and demand remained weak.

The current market price for PBAT in East China fluctuates between 11,300 and 12,000 RMB/ton, with an average price of 11,650 RMB/ton. This represents a decrease of 50 RMB/ton, or 0.85%, compared to the beginning of the week. On the supply side, leading large-scale enterprises maintain high operational loads, and the market supply remains ample, with sluggish sales performance. On the demand side, downstream modification enterprises and biodegradable film bag companies have average order follow-ups, with large enterprises maintaining acceptable operating rates, while small and medium-sized enterprises have lower operating rates. There is a cautious wait-and-see sentiment regarding raw materials, leading to conservative purchasing for lower benchmarks, and export orders are also performing generally, resulting in insufficient overall supply-demand data support. Cost data has slightly decreased; however, cost pressures persist in the long term, limiting the downward space for market prices.

2. Declining raw material costs release profit margins while simultaneously weakening market support.

Figure 2 Cost and Profit Trends of PBAT in China (Yuan/ton)	Figure 3 Domestic PBAT and Raw Material Price Trends (RMB/ton)
Data source: Longzhong Information	Data source: Longzhong Information

The weekly average price of the main raw material BDO (East China bulk cargo) fell by 2.92% to RMB 7,950/mt, while the average price of adipic acid (AA) plunged by 4.34% to RMB 8,507/mt. Only PTA edged up by 1.59% due to supply-side disruptions. Overall declines in raw material prices led to a 2.02% week-on-week decrease in the theoretical production cost of PBAT, while the weekly average profit rebounded to RMB 250/mt, surging 190.70% from the previous week, significantly improving profitability. However, falling raw material prices dampened downstream purchasing sentiment and weakened support for the market.

3. PBAT Overcapacity and weak demand support

Figure 4 Trend of Domestic PBAT Capacity Utilization Rate	Figure 5 Trend of Operating Rates for Domestic Biodegradable Film Bags
Data Source:Longzhong Information	Data source: Longzhong Information

The current PBAT industry capacity utilization rate stands at 22.18%, remaining at a relatively low level. Due to large industry capacity and weak demand, production shutdowns at some PBAT facilities have become commonplace, resulting in limited effective output. Leading industry players such as Zhuhai Kingfa and Blue Ridge Tunhe have maintained high operating rates over the long term, while Zhejiang Huafon, Hubei Yihua, and Wanhua Chemical have sustained stable production, yet this has been unable to change the overall market situation of ample supply and pressure on shipments.

This week, the operating rate of sampled enterprises in degradable packaging film and bag products was 36.60%, up 1.20 percentage points week on week. With slightly improved demand for degradable films and bags in summer, orders for some degradable film and bag enterprises have gradually picked up, and the operating rate of large-scale enterprises has increased slightly, while production changes among small and medium-sized enterprises have been limited. Large enterprises, supported by rigid orders from supermarkets, express delivery, milk tea and beverage packaging, exports, and other sectors, maintained an operating rate of 40% to 70%, while leading enterprises operated at around 90% capacity. Small and medium-sized enterprises continued to operate at a low level, with operating rates generally between 10% and 30%. Product manufacturers remained cautious about raw materials, showed low enthusiasm for stockpiling, and were hesitant to make inquiries and purchase small quantities at low prices, providing weak support for the market.

4. Weak and range-bound, with the tug-of-war between costs and supply-demand fundamentals continuing.

Overall, the short-term price trend for PBAT is expected to be weak and fluctuating. The mainstream price range in the East China market is between 11,200 and 11,900 yuan/ton, with an average price of 11,500 to 11,600 yuan/ton. On the cost side, BDO and adipic acid prices are expected to remain weak, while PTA prices are likely to stabilize; overall cost support may further weaken, providing space for price declines. On the supply side, production is expected to increase, with plans to restart PBAT facilities in Gansu Mogaok and Xinjiang Shuguang, and leading enterprises are operating at high capacity, making it difficult to change the relaxed supply pattern in the market, which continues to exert pressure on prices. On the demand side, there is room for improvement in the operating rates of biodegradable film bags, but the mentality of product companies to observe and purchase raw materials as needed is unlikely to fundamentally change, resulting in a weak supportive effect on the market. Additionally, summer export orders are generally low, which is unlikely to provide any positive impact on market prices.