Polyester: with approaching peak season, will destocking cycle extend?

Polyester market has apparently strong resilience this year impacted by various factors. High operating rate of the whole value chain since Jun during the off-season has also sustained for several months. Most companies are unlikely scale down production actively in Sep, excluding those affected by the meeting issue.

The performance is not bad during the off-season as some market players are preparing for the coming peak season in Sep. Sep will come soon, and the expectation of peak season will start fulfilling.

How much increment is created by high polyester polymerization rate?

Compared with the polyester production since 2021, the monthly average production of Jun-Sep, 2023 (based on 90% of polyester polymerization rate) rose by near 1 million tons over the same period of last year, including PFY, PSF, PET fiber chip, PET bottle chip and other related products.  

From the angle of YOY change, market experienced similar demand recovery cycle in 2021, so it seemed to have some comparability. The production increased considerably in the first half of 2021, especially the monthly increase in Q1, reaching more than 1 million tons but starting reducing thereafter.

The status of this year is different. The polyester production was low in Q1, especially in Jan-Feb, started increasing apparently in Q2 and remains strong now.

Of course, the situation is different from year to year. It only serves as a simple reference for trend judgment.

In fact, downstream market has shown signals to improve. Looking at the comprehensive performance of fibers, stocks of many sectors started reducing in Jul and Aug, while companies reflected that the destocking of most products was very slow, excluding well reducing stocks rayon yarn link. Therefore, players did not have clear feeling of destocking. 

The polyester production advanced in the first half of 2023 when the stocks were low at the beginning of year, coupled with the release of domestic demand and growing export etc. Meanwhile, the production was practically consumed. In the second half of 2023, as earlier stocks are abundant, later destocking will rely on the domestic and export demand.

Some enterprises worry the performance of the peak season in the second half of year may be not good. The so-called bad performance in peak season does not necessarily mean production curtailment and operating rate reduction, but it may indicate longer destocking cycle. In addition, before the destocking is complete, it will be hard to see rising price.