How bad is polyester filament yarn market compared with 2015?

Recently, some market players bear some questions in mind: how bad is PFY market now? How does it compare with history?

The operating rate of PFY, PSF and PET bottle chip plants is at 65.6%, 82.7% and 102.4% respectively now, with that of PSF factories under upward trend while that of PFY plants to fall further. The inventory of PSF is below 10 days but that of PFY has been above one month.

Last downtrend appeared near 2015 on PFY market. Price kept reducing and hit historic low in 2015, and PFY companies witnessed meager profit after inventory depreciated. The cash flow was during negative territory based on spot feedstock price. PFY producers cut operating rate with pressure from supply and demand, ending up with decreasing output and production value.

Compared with 2015, PFY factories saw more apparent pressure from inventory, profitability and supply in 2022.

The inventory of POY and FDY has been above 30 days for several months in 2022, hitting historic high, while the monthly high was only around 20 days in 2015.

As for the profitability, losses have been improved after PFY plants cut production in May and Jun of 2022, while the monthly cash flow is still during negative territory. The high inventory burden has not been alleviated temporarily.

PFY companies scaled down production with oversupply pressure. The lowest level of Aug was near 76.5% in 2015, but the operating rate was all lower than this level since Apr 2022. The operating rate of direct-spun PFY enterprises is estimated to be lower than 70% in Jul.

The performance was divided among factories. The capacity of the six leading listed companies accounted for near 70% and the comprehensive run rate was at 70-80%, while the comprehensive operating rate of other direct-spun companies has been slipped to 40-50%.

As for the operating rate of fabric mills and DTY plants, the monthly run rate has sustained as low as 50-60% in 2022. Therefore, although PFY plants’ operating rate has hit historic low, their high inventory still failed to descend.

The pressure from supply was both big in 2015 and 2022, while the launch of new units differed a lot. Theoretically, there will be less new units to expand capacity under oversupply pressure. In 2015, 2.15 million tons of direct-spun PFY capacity started operation and new DTY machine was around 600 sets. In 2022, 1.86 million tons of direct-spun PFY capacity has been expanded in the first half of year and near 3.5 million tons of capacity is to be launched in the second half of year, with yearly total increase at around 5.35 million tons. New DTY machine is scheduled to be around 1,800 sets. The capacity expansion on PFY and downstream market is both huge in 2022. With muted demand and slow economic growth, enterprises are directly under pressure.

Supply of PFY was excessive in 2015, while the new capacity was limited in 2016-2018 and near 4 million tons/year of capacity was eliminated or being integrated or purchased. In 2023 and afterward, the elimination of old units may appear again. As new capacity is still expected to be high, will the phased-out units be directly abandoned or not should be concerned.