Consumption recovery: Why polyester yarn market remains dull?

Since 2023, overall consumption has been recovering, with a year-on-year increase of 8.5% in the total retail sales of consumer goods from January to April, and significant increases in the textile and apparel, catering, jewelry, and automotive industries. However, it should be noted that this high growth rate is achieved on a low base. In April, the total retail sales of consumer goods increased by 18.4% year-on-year, with an average growth rate of only 2.6% over the two years. The retail sales of textiles and apparel in April increased by 32.4% year-on-year, with an average growth rate of only 1% over the two years.

Since there is a certain time lag in clothing retail data, it seems that the operating rate and inventory level of the textile industry in the first half of the year can better reflect the fact of consumption recovery.

In Jiangsu and Zhejiang provinces, the operating rate of downstream polyester filament weavers in 2023 is second only to that of 2021, higher than that of 2020 and 2022. In terms of yarn, the operating rate of pure cotton yarn is at a high level this year, second only to the best market in 2021, and the inventory maintains a low level. Rayon yarn performs moderate, with modest operating rate and inventory.

Polyester yarn seems to have become the least favored variety, and it has not shown any improvement despite the backdrop of consumption recovery. The operating rate of polyester yarn is lower than in previous years, while the inventory is higher. In order for enterprises to survive, profits must be gained, but since last July to now, the spot profit of polyester yarn has continued to be in a state of loss except for the brief "good start" after the Spring Festival. It is exactly in May last year that polyester yarn mills started to cut production and operating rate, and this year spinners still have to follow the old routine. Why is polyester yarn facing such difficulties?

Some people believe that the reason behind the difficult situation of polyester yarn is due to the narrowing price spread between cotton and polyester, with cotton products becoming more advantageous. Of course, there are reasons in this regard, but it is definitely not the main reason. Before August 2021, when the price gap between cotton and polyester was low, such situation had never occurred. The fundamental reason lies in the substitution of "imitation cotton yarn", a product made of polyester filament.

Imitation cotton yarn, also known as "cool cotton" or "mitation cotton" yarn, has existed for many years, but it has never gained as much popularity as this year. Most of the imitation cotton yarn is twisted together by POY and FDY yarn, and some are composed of POY and POY yarn, making the fabric to possess the advantages of cotton to some extent (similar to polyester yarn). The specifications can reach 10-80S, even 100S. In terms of price, conventional varieties such as imitation cotton yarn 32S are 1000-1500 yuan/mt lower than pure polyester yarn 32S. Therefore, imitation cotton yarn has both the advantages of polyester yarn and a lower price, catering to the demand for "consumption downgrading". As such, the slight quality difference seems to be less important.

A number of yarn mills, including major factories such as Hengyi, Xinfengming, Hengli, and Xinghui in Jiangsu and Zhejiang, have all produced imitation cotton yarn. Some noted an increase in sales this year, with a few indicating a significant increase. Since the production of imitation cotton yarn is relatively scattered, it is difficult to calculate the overall production. However, considering the production capacity of tens of millions of tons of polyester filament, a small parts of substitution is lethal enough for polyester yarn.

Currently, the volume of imitation cotton yarn has reached saturation point, and there are already signs of internal competition. Overall, the impact of imitation cotton yarn on pure polyester yarn will continue in the short term, and polyester yarn mills are forced to seek new paths. Some of them have already switched their products toward the blended, differentiated, and functional products, which are expected to be the new trend in the future. At the same time, we also look forward to a "consumption upgrade," so that pure polyester yarn will be able to regain market favor.