Inventory: Key issue in polyester industry chain

Post-Chinese New Year, the polyester industry chain experienced a shift from initial optimism to a more cautious outlook. Despite some moderate stabilization since then, market sentiment remains relatively subdued.

1. Adjustment in Post-Holiday Demand Expectations

One of the reasons for the weakened post-holiday market atmosphere is the lower-than-expected demand. Projections for polyester polymerization rate in February were continuously revised downwards, with an increase in pre-holiday maintenance plans and a slower-than-anticipated pace of post-holiday plant restarts. While operating rate of textile mills have gradually resumed in March, the purchasing atmosphere remains tepid, keeping market sentiment subdued, and polyester polymerization rate are still some distance away from their peak.

Many varieties this year experienced a transition from pre-holiday optimism to post-holiday adjustment. From December to January, various fibers in the industry chain saw a surge in demand due to a temporary market warming. However, starting from February, the market quieted down, with the delayed resumption of polyester and downstream mills due to rain and snow after the holiday, leading to a tempering of earlier optimism.

However, since March, there has been an improvement in demand from polyester to textile mills. The overall trend aligns with normal seasonal demand. Yet, the market atmosphere often remains relatively subdued.

2. Inventory Pressure: A Potential Key Issue

Presently, the direct pressure on the industry chain appears to stem mainly from inventory concerns. This includes the downward adjustment of polyester polymerization rate, the decline in raw material prices, and the weakened purchasing atmosphere.

For filament yarn and staple fiber factories, sales began to decline in early February, leading to increased maintenance plans due to continuous stock pressure. The slow restart of plants after the holiday and the substantial inventory buildup over twenty days have intensified factory pressure. Staple fiber factories also faced challenges due to low-priced offers from traders.

For raw material market, the PX and PTA market liquidity appears relatively abundant, partly due to continuous stockpiling. PX futures prices in early March declined significantly, reflecting pressure on spot liquidity. A similar situation is observed in PTA, which started stockpiling at the end of last year, with disruptions in December due to cold wave logistics. However, this wasn't initially evident, with the market sentiment only turning negative after the post-holiday decline in purchasing atmosphere. MEG market performed well due to good port deliveries during the Spring Festival, but market sentiment declined post-holiday once polyester factories completed raw material procurement. Despite theoretically being in a destocking phase in March, spot market sentiment remains weak.

In conclusion, unless there's an unforeseen surge in crude oil prices or other disturbances like gasoline demand, resolving inventory issues remains a priority for the polyester industry chain.