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Several views toward post-holiday polyester and downstream markets

2023-02-07 08:34:08 CCFGroup

Before the Spring Festival holiday, many market players were full of expectation toward the market after holiday. Capital market also strongly climbed up. Stock market welcomed a good start during the first trading day after holiday, while commodity and futures markets dived.

 

According to the survey on polyester and downstream market, players held anticipation toward market outlook after the pandemic, while the real market performed lukewarm. The trend of end-user demand in the first half of 2023 will not be clear until after the second half of Feb.

 

1. In terms of the production resumption, most polyester plants and downstream factories successively restarted production from the eighth day of the first lunar month as the previous years. Some companies, such as the warp knitting mills in Haining, resumed production relatively later. Polyester companies restarted production successively but was not as fast as anticipated. Some polyester enterprises reflected that the return of workers was slow, impacting the raise of operating rate.

 

2. Labor shortage does not appear this year. The increase of wage in textile industry also does not emerge. According to the survey made by CCFGroup, the wage of most textile workers are flat with last year in 2023 and some even witness falling salary, including those in polyester companies.

 

3. Most textile companies have limited orders at hand now and orders can be described as scarce even in some factories. It needs to watch the order recovery after the second half of Feb as it is just at the beginning of year now. Most market participants expect demand to face pressure in the first half of 2023. The foreign trade is estimated to encounter big pressure and the domestic demand may recover, but the demand for apparels may improve limitedly. In addition, the weak real estate market will also constrain the consumption of home textiles. There are two Lunar February in 2023. The recovery of orders may be late. Therefore, downstream plants may be not in a rush to produce.

 

4. PFY stocks of downstream plants are above 20 days after the Spring Festival holiday, which can be described as medium compared with the previous years. Based on the production resumption progress, the PFY stocks can guarantee production until end-Feb/early-Mar in most factories. Downstream plants are expected to lack momentum to restock in short run when price of PFY has been around 1,000yuan/mt higher than the low level before Lunar New Year’s holiday, many have prepared PFY earlier, and the orders are not abundant. Therefore, if feedstock cost lacks continuous stimulus, downstream players are likely to consume PFY bought before. That means sales will remain low in polyester companies at least in recent half a month.

 

5. One large garment exporter in Zhejiang reflects that orders are worse than the same period of last year when demand from Europe and US dwindles and local inventory burden is big. Another company Shenzhou International reflects that the orders are moderate. It is an industrial chain integration company and has global layout. After the pandemic prevention and control eased in China, it enjoys a stronger competitiveness in snatching orders. Therefore, it is an individual case and does not represent the industry as a whole.

 

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Inventory of some overseas apparel brands

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Export of textiles and apparels have faced pressure in China and Southeast Asia since the second half of 2022. The growth rate of textile and apparel export has decreased to -17% in mid-Dec. Companies are expected to encounter huge export pressure at least in the first half of 2023 when the overseas consumption is anticipated to fall and enterprises are active in destocking. Export may be low at first but climb up later throughout 2023 when the export base was high at first but reduced later in 2022. The growth rate of textiles and apparels is estimated to be above -10% in the first half of 2023 and may gradually recover in the second half of year, with the overall growth rate estimated at around -5% throughout 2023. In other words, demand for polyester market may mainly depend on domestic demand at least in the first half of 2023 in expectation of modest export demand. How much the domestic demand for textile and apparels can stimulate market still needs further observation.

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