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Polyester market faces higher new pressure

2020-06-30 09:24:19 CCFGroup

Downstream buyers began having bottom-fishing from late-Apr with eased lockdown abroad, in expectation of production resumption worldwide and rising crude oil, and turned to replenish as PFY price moved up. However, the purchasing slowed down after oil price plunged from Jun 11. Downstream players have presented changing mindset in recent period. Even though PFY companies discounted for promotion, the actual effect was not big. Polyester market is supposed to face bigger pressure in short run.

In view of the downstream orders, operation rate of downstream market is expected to be easy to reduce but hard to rise as Jun-Aug are traditional slack season on textile market and in expectation of heater temperature later. In addition, the pandemic was previously estimated to mitigate abroad in the second half of year, but it still seems to continue spreading. The earlier speculation on the production restart abroad and the expectation of better foreign demand is decreasing marginally based on current status. High stocks of finished goods and feedstock of downstream market may render players to retreat to sideline for a period during the off-season. Therefore, the buying interest of downstream market is anticipated to keep sluggish at least in Jul. Stocks of polyester products are supposed to continue mounting, and the inventory pressure may gradually incarnate from the second half of Jul. In addition, the profit of polyester sector is narrowing and such tendency may continue into Jul.

As for the polyester polymerization rate, it is expected to be high in Jun-Jul. The pressure on polyester market is expected to enlarge in Jul, but it cannot be described as unbearable, which may weigh on the run rate limitedly. Some small units that were offline before will restart operation in early-Jul, including 200kt/year from Wujiang Xinmin, 200kt/year from Sanfame, 150kt/year from Sinopec Tianjin and some small PET bottle chip units, which will ease the burden of production cut in some regions.

Generally, the following points are major opinions CCFGroup held: 1. Jun is the yearly best time for polyester market, with the highest operation rate, lowest stocks and moderate profit. 2. The expectation of marginally improving demand and production resumption abroad is diminishing with the coming of slack season. Stocks of polyester products are likely to accumulate in Jul, not ruling out production cut in some plants, but the polyester polymerization rate may sustain temporarily factoring into the restart of some units. 3. Whether downstream buyers will have bargain-hunting should be highly noted in Aug. If price of polyester products declines to low level, downstream buyers may replenish some feedstock under low price after partial stocks purchased before being digested in Jul. That means the contradiction on polyester market is likely to be relieved temporarily by that time. 4. The demand in Sep-Oct is expected to be more down-to-earth. If demand is not as good as anticipated during the traditional peak season and stocks reduce limitedly, the speculation on high inventory pressure may appear again, not ruling out falling polyester polymerization rate. The downward risk of polyester polymerization rate in the fourth quarter should be particularly alerted.