Guosheng Securities: Rising Oil Prices Accelerating Transmission to PET - Focus on Bottle Flake Price Increases and rPET New Blueprint

Guosheng Securities released a research report stating that rising oil prices are accelerating the transmission to PET, significantly improving the profitability of bottle chips. As the oil price center rises and the Middle East raw material supply crisis worsens, the market is gradually transitioning from the first stage of high Middle Eastern capacity utilization in trading chemical products to the second stage of declining refinery operating rates in Asia. The Strait of Hormuz transports nearly 15 million barrels of oil per day, accounting for about 34% of global oil trade. Aromatic chain products, with their low substitutability along the oil-based route, have strong price increase potential. Currently, prices are accelerating transmission along the naphtha-PX-PTA-PET industry chain. The profitability of polyester bottle chips is marginally improving, and the report suggests paying attention to Wankai New Materials (301216.SZ).

Guosheng Securities’s main points are as follows:

Raw Material Side: 1) PX-PTA: Reliance on a single oil-based route, with significant price increases

According to Baichuan Yingfu, the average price of PTA in East China this week (3.6-3.12) was 6,303 yuan/ton, up 17% week-on-week, but upstream PX prices increased more significantly than PTA; the PTA operating rate this week (3.6-3.12) was about 77%, with market supply basically stable. PTA depends on a single oil-based route; if the PTA operating rate declines, supply disruption risks should be monitored. 2) MEG: Rising oil-based costs, with coal-based and natural gas-based methods expected to benefit. Ethylene glycol is highly dependent on oil, accounting for 67%, a typical oil-priced product. This week (3.6-3.12), the average price of ethylene glycol in East China was 4,519 yuan/ton, up 15% week-on-week, with an operating rate of about 62%. Some ethylene-based ethylene glycol production has reduced output. Non-oil routes are expected to benefit.

PET Bottle Chips: Rising costs are accelerating transmission to PET, boosting bottle chip profits

The ongoing escalation of geopolitical tensions in the Middle East is driving oil prices higher, which is accelerating transmission to PET via PX-PTA. According to Baichuan Yingfu, the average price of polyester bottle chips this week (3.6-3.12) was 7,990 yuan/ton, up 23% week-on-week; the price spread of bottle chips increased, with profits around 316 yuan/ton, up 362 yuan/ton from the previous week. Major manufacturers reducing contract volumes have caused tight market supply, coupled with peak demand season in March and April, and industry joint production controls to counteract internal competition, leading to marginal improvement in bottle chip profitability.

rPET Opens New Growth Opportunities; Bio-Enzymatic Recycling Has Huge Potential

Driven by overseas environmental policies and corporate green goals, demand for rPET is strong. Under the push for a circular economy, countries worldwide are setting environmental targets, with global brand giants actively responding, jointly driving rPET market growth. Europe is a key rPET market, with regulations requiring rPET content to be at least 25% by 2025 and at least 30% by 2030. It is estimated that Europe’s rPET demand will reach about 4 million tons by 2025.

Bio-Enzymatic Method as a New Engine for rPET Recycling

rPET production methods include physical, chemical, and bio-enzymatic processes. Traditional physical recycling is downgraded and can only process waste PET bottles with low-quality output; bio-enzymatic methods can truly achieve “monomer-to-monomer” recycling, capable of processing 100% of PET waste, including used plastic bottles and polyester fibers, with product quality comparable to virgin PET, enabling high-value applications. Compared to chemical methods, bio-enzymatic processes operate under milder conditions and produce higher purity. According to Carbios’s financial reports, the global high-end rPET market is expected to grow at a compound annual growth rate of about 17% from 2025 to 2050. The high-end bio-enzymatic rPET products have high quality and huge development potential.

Recommendation: Focus on Wankai New Materials

The company has a production capacity of 600,000 tons of ethylene glycol from natural gas, with significant process cost advantages; it has jointly built a 50,000-ton rPET plant with France’s Carbios and plans to expand to 300,000 and 500,000 tons, with a long-term goal of reaching one million tons, opening growth space.

Risks: Downstream demand falling short of expectations, significant raw material price fluctuations, raw material supply disruptions.