China's Demand for Bottle-Grade PET Chips to Grow 15% from 2010 to 2015   

By Wei Zhihua, Research Institute of Industrial Economics of CNCIC

Capacity grows fast

The international bottle-grade polyester (PET) market started to form in the late 1970s. Although China's bottle-grade PET industry began in the late 1980s, it has developed very fast. In 1990, the production capacity of bottle-grade PET in China was only 12 000 t/a. In 1999, it reached nearly 300 000 t/a. After 2000, due to the rapid growth of the beverage industry, PET bottles have increasingly widely replaced traditional packaging materials, making bottle-grade PET in short supply. This attracted a large amount of investment, causing the rapid growth of bottle-grade PET capacity. By 2002, the capacity of bottle-grade PET in China reached 1.5 million t/a, and the country could basically be self-sufficient in this product. By 2010, the capacity reached 4.88 million t/a. From 2002 to 2010, its annual growth rate was 15.9% on average, far higher than Asian or global capacity growth. In 2010, the output of bottle-grade PET chips in China was 3.6 million tons. The capacity expansion of bottle-grade PET is much faster than the market demand growth in China, making the market rapidly leap from the basic supply and demand balance into oversupply and the economic efficiency of producers decrease substantially. Major bottle-grade PET producers in China in 2010 are shown in Table 1.

Table 1 Major bottle-grade PET producers in China in 2010
Producer    Capacity (kt/a)
Jiangsu Sanfangxiang Group Co Ltd    1200
Changzhou Huarun Composite Materials Co Ltd    550
Sinopec Yizheng Chemical Fiber Co Ltd    380
Jiangyin Chenggao Packing Material Co Ltd    300
Zhejiang Hengyi Group Co Ltd    250
Ningbo SK Zhenbang Chemicals Co Ltd    100
Zhejiang Wankai New Materials Co Ltd    200
Far Eastern Industries (Shanghai) Co Ltd    500
Dragon Special Resin (Xiamen) Co Ltd    200
Hainan Shengzhiye High-tech Inc    240
Guangzhou Pan Asia PET Co Ltd    200
Zhuhai Yuhua PET Co Ltd    140
Kaiping Chunhui Co Ltd    100
Wuliangye Group Push Co Ltd    150
PetroChina Liaoyang Petrochemical Company    100
Xinjiang Blue Ridge Tunhe Chemical Co Ltd    60
Others    210
Total    4880

   In terms of production distribution, Jiangsu province, Zhejiang province and Shanghai are key areas for the production of bottle-grade PET chips in China, followed by Guangdong province and Hainan province. As of the end of 2010, the capacity of the five provinces was 2.43 million t/a, 55 000 t/a, 500 000 t/a, 440 000 t/a and 240 000 t/a, accounting for 50%, 11%, 10%, 9% and 5% of the national total, respectively. Their combined capacity reached 4.16 million t/a, accounting for 85.2% of the national total.
   As they are optimistic about the market prospects of bottle-grade PET, many Chinese companies are now building or expanding bottle-grade PET plants. It is expected that in 2011, the new capacity of bottle-grade PET chips in China may reach 1.2 million t/a, and the total capacity may exceed 6 million t/a; and in 2012, the new capacity will reach 1.1 million t/a, and the total capacity may exceed 7 million t/a.

Exports are far greater than imports

At present, China's output of bottle-grade PET chips can fully satisfy the domestic demand, and a large amount is also for exports. However, with the commissioning of more than 1 million t/a additional capacity in the next 2 to 3 years, China's bottle-grade PET chip market will fall into oversupply.
   Since 2002, China has gradually shifted from a net importer of bottle-grade PET chips into a net exporter and rapidly grown into one of the world's major exporters in a short time. With the increasing oversupply of bottle-grade PET chips, Chinese players gradually focus on oversea markets. Since 2006, the import of some special bottle-grade PET chips has increased in China, but compared with export growth, the import growth is still very slow. At present, the imports of bottle-grade PET chips in China mainly come from Chinese Taiwan province, Korea, Malaysia and Japan.
   In 2008, China imported 21 000 tons of bottle-grade PET chips and exported 772 000 tons; in 2009, it imported 33 000 tons and exported 592 000 tons; and in 2010, it imported 20 000 tons and exported 706 000 tons, as shown in Table 2.

Table 2  Imports and exports of bottle-grade PET chips in China   (thousand tons)
Year    Import volume    Export volume
2008    21    772
2009    33    592
2010    20    706


Demand prospects are optimistic

At present, China's PET beverage packaging industry is developing fast, and its demand for bottle-grade PET is rising sharply. PET bottles are widely used as the containers of carbonated drinks, mineral water, tea drinks, fruit juice, edible oil, cosmetics and beer. Bottle-grade PET products are mainly divided in the following categories: water bottles, carbonated beverage bottles, hot-fill bottles, edible oil bottles, wine bottles, seasoning packages, and food and non-food packages. Thus, the potential market space of bottle-grade PET chips is very large.

1. Beverage Packaging:
PET bottles have been successfully used in the packaging of carbonated beverages, water, tea, fruit juices and other soft drinks. Out of this application, water bottles account for about 58.5%, carbonated beverage bottles 19.5%, fruit juice bottles 19.5% and tea bottles 2.4%.
   In 2010, the output of soft drinks in China was about 74.2 million tons, up 24.1% year on year (yoy). The output of various soft drinks all grows fast in China. In 2010, the output of bottled water was 42.5 million tons, up 34.5% yoy; the output of fruit and vegetable juice was 17.62 million tons, up 21.7% yoy; the output of refined tea was 1.43 million tons, up 20.2% yoy; and the output of carbonated drinks was 12.65 million tons, up 0.9% yoy, indicating that the domestic demand for carbonated drinks has been saturated. In terms of growth rate, the output of bottled water grew fastest, and that of carbonated drinks grew lowest.

2. Edible oil packaging:
PET has good oil resistance and is transparent, non-toxic, tasteless and not easily broken. It also has excellent barrier to oxidation and good shelter to UV rays, so it can protect edible oil from oxidative deterioration. Thus, the demand for PET bottles for edible oil is also rising in China.
   The annual consumption of edible oil has been growing rapidly in China in recent years. In 2010, it reached 11.3 million tons, up 7.4% yoy. In the past, most edible oil was packed with high-density polyethylene (HDPE). With the elevation of consumer awareness and the pursuit of packaging transparency and cleanliness, bottle-grade PET has been widely used in the packaging of edible oil. Currently, about 10% of edible oil in China is packed with small PET bottles, consuming about 750 000 tons of bottle-grade PET annually. In the future, PET bottles will gradually replace HDPE bottles in the packaging of edible oil.

3. Beer packaging:
With the further improvement of PE bottles in impermeableness, toughness, UV resistance, acetaldehyde content control and recyclability, P