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J.P. 摩根-中国石油化工行业报告-2018.3.5-28页.pdf:
https://u899837.pipipan.com/fs/899837-242216103
Background: We recently met Mr Cao Weidong, CEO of Zhejiang Huafei
Recycling Resources, a large Chinese PET recycling company. He is also the
chairman of the recycled PET (re-PET) association of China and operates
recycling centers in China, SEA and North America. Buyers of his recycled
PET pellets/PSF include global brands like Coca-Cola, Nike and Unilever.
Aside from PET, Zhejiang Huafei also produces recycled PP, PS and ABS.
China flips into 50% deficit for re-PET in 2018 – Domestic recycled
PET (high end) trades at premium to virgin PET: Since the waste plastic
import ban was announced, most industry participants have expect virgin
PET to fill most of the ~1.5Mt deficit caused by the ban. However, despite
attractive pricing (re-PET usually trades at RMB1,000/t discount to virgin),
virgin PET has been unable fully to substitute re-PET, as global brands like
Coca-Cola demand recycled plastics to meet environmental goals. Re-PET
produces only 1/30 carbon emissions versus virgin PET.
Global brands pledge to use recycled plastics: In 2017, Coca-Cola
announced it would use 50% re-PET in its UK bottles by 2020 (globally by
2030), which Mr Cao believes might increase its re-PET demand by >20%.
Similarly, Unilever has pledged to use 100% recycled packaging by 2025.
Waste PET imports fall to (almost) zero in January – Growing piles of
rubbish in Europe, US and Asia: Chinese imports of waste PET fell to 2kt
in January, -99% y/y and sharply down vs avg monthly imports of 211 kt
and 181 kt in 2017/2016 respectively. Since China’s ban went into effect,
waste plastic recyclables have been piling up in, among others, Hong Kong
and the EU, with the latter proposing a new tax on packaging (link).
Chinese recyclers flock to SEA – first wave of new capacity in 2H18?
Raw waste plastic prices in China are double ex-China prices – prompting
Chinese recyclers to relocate to Southeast Asia, where they can enjoy NPM
of >15%, the highest in years. Mr Cao has personally led about six Chinese
research expeditions across Asia and given typical eight-month lead times,
he believes the companies that made investments immediately after the ban
was announced in mid-2017 will see capacity come online by 2H18.
Enviable re-PSF margins of RMB1,500/t might be eroded to RMB500/t
in two years: With new capacity coming online, Mr Cao believes margins
will be quickly eroded to ~RMB500/t in two or three years.
January virgin PE imports surge to record high: China PE imports rose
to 1.29Mt in January (+19% y/y), a new record high – likely impacted by the
waste plastic import ban and restocking (see note & note).
PET, PTA, MEG & PX strong for 1H18 but might come under pressure
in 2H: Within Asia, Nan Ya Plastics (N) and IVL (OW) are most leveraged
to polyester, while refiners RIL (N) and S-Oil (N) are leveraged to PX.
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