Polyester industrial yarn: suffering losses due to supply/demand contradiction

Production of new polyester industrial yarn (PIY) units gradually released while the growth rate of downstream demand was far lower than that on supply side. That meant intensified contradiction between supply and demand in 2021.

Production of PIY was estimated to increase by above 20% in 2020 and the growth rate was expected to be 40-50% in Jan-May, 2021.

As for demand for PIY, exports performed well. PIY exports increased by 31.6% on annual basis in Jan-Apr, 2021. However, domestic demand grew limitedly. Current stocks of PIY have accumulated substantially compared with the end of 2020: PIY inventory rose by below 10% in some plants, which was slanting low, but almost doubled in some enterprises. Sales of PIY were tolerable in Jan and Mar, presented sluggish in Feb due to the Spring Festival holiday, and were plain in Apr-May. As a result, stocks kept mounting, especially in new plants that commissioned production in the second half of 2020.

Competition on PIY market was fierce due to the contradiction between supply and demand. Current price of spot bright PET fiber chip was near 6,100yuan/mt, and the settlement price in May was at 6,525yuan/mt, by 3-month acceptance. Price of ordinary high-tenacity PIY was only at 8,200-8,300yuan/mt, lower traded at 7,800-8,000yuan/mt. Cash flow of chip-spun PIY has turned to negative territory since late-Apr and the losses even expanded in May. 

Large companies still do not intend to scale down production temporarily to sustain market share despite of losses. Price competition is expected to remain fierce in the future. Large enterprises generally have accompanied polyester units, with lower actual cost, and are still near cost line. Therefore, they will not curtail operation easily. Some small chip-spun units have been suspended production under plight. As for market outlook, if upstream cost can climb up, PIY plants can gain profit after stocks being appreciated. Otherwise, the future profitability is worrying.