PIY producers cut production amid big losses

Polyester industrial yarn market performed badly in Q2-Q3. The processing fee of PIY kept decreasing since Apr and continued refreshing new low. Trading price of ordinary high-tenacity PIY was basically at 7,500-7,700yuan/mt and that of spot bright PET fiber chip was at 6,400yuan/mt. The losses of chip-spun PIY was near 1,300yuan/mt.

Excessive capacity was the route for such a huge losses. Price competition was fierce with supply glut. Some PIY plants chose to cut production in order to reduce losses. Coupled with intensified control of total amount and intensity of energy consumption, many enterprises were required to limit production. The overall operating rate of PIY plants apparently decreased. More factories may curtail production later.

Reducing supply of PIY after run rate dipped was supportive to PIY price. Price of PIY increased on Sep 24: offers for ordinary high-tenacity PIY 1000D were at 8,300yuan/mt, by cash, ex-works, those for low-shrinkage ones were at 8,800yuan/mt, by acceptance and those of adhesive activated ones were at 9,100yuan/mt, by cash, ex-works. Export offers were also raised: with quotations for ordinary high-tenacity 1000D at $1,170/mt and those for low-shrinkage ones at $1,240/mt, FOB. However, actual trading price was mixed, which may rise only when stocks of PIY decline. Price of bright PET fiber chip was near 6,500yuan/mt and offers of ordinary high-tenacity PIY 1000D were at 8,300yuan/mt after increased, with spread at 1,800yuan/mt, still not profitable.

With big losses, if PIY plants cut production to curb price from falling jointly, price of PIY is supposed to have strong cost support in short run. Once downstream demand improves, the price spread of PIY and feedstock is still likely to expand. However, the pressure of excessive supply cannot be ignored.