Expectation of post-holiday polyester polymerization rate revised

Just as mentioned before, some small and medium-sized polyester companies did not plan to suspend production for turnaround during the Spring Festival holiday but chose to curtail output from the second half of Jan. The strength and time of curtailment was weaker than earlier expectation. In addition, some large PFY companies started raising run rate recently. The polyester polymerization rate did not tend to reduce in the first half of Jan as usual but ascended, with daily high level at 88.4% in H1 Jan.

According to the latest production adjustment plan of polyester companies, the polyester polymerization rate is expected to be averaged at 86% in Jan and the daily low in end-Jan and early-Feb is also estimated to climb up obviously from last estimate, which may be near 82%. Some polyester companies, such as Xinfengming and Tianlong, will have maintenances after Spring Festival holiday in Feb, but the monthly polyester polymerization rate is anticipated to increase apparently than last estimate.

In terms of the operation status on downstream market, most plants have shut down for the Spring Festival holiday, with run rate only at 20%. Many water-jet fabric mills still keep running and the production may be suspended from this weekend. In general, downstream factories are shutting down for Lunar New Year slightly early this year, especially warp knitting plants. PFY stocks of downstream companies were mainly between 7-15 days now, which were around 25 days in previous years (higher at 30 days and lower at 20 days). Some downstream buyers may replenish in the following 10 days but most are inactive in purchasing as PFY prices have rose by around 1,000yuan/mt. Downstream buyers may purchase less after Lunar New Year's holiday compared with the corresponding period of past years.

The expectation toward the performance on polyester market after holiday is also changing:

Demand for PSF and PFY is mainly from textiles and apparels market, including domestic sales and export. By convention, textiles and apparels market will largely rely on export in the first half of year and depend on domestic sales in the second half of year. Export of textiles and apparels may better than domestic sales in 2022, which will be supportive to the demand for fibers in the first half of 2022. PSF and PFY companies are estimated to run at high capacity in the first quarter of 2022 but their run rate is estimated to be revised down from last estimate due to post-holiday inventory burden.

PET bottle chip market performed well in the fourth quarter of 2021 and companies still saw high profit and low inventory now. In the first quarter of 2022, PET bottle chip companies is expected to witness ample orders, high profit and little turnaround. Performance may be moderate in the second quarter. Thus, PET bottle chip producers may postpone turnaround into the second quarter. Currently, Yisheng Dahua’s 700kt/year unit and Far Eastern's 550kt/year plant are scheduled to have turnaround in Apr.

Polyester companies will face pressure to limit production due to the 19th Asian Games Hangzhou 2022 and the Dual Control of energy consumption in the second half of 2022. Exports of PET bottle chip are supposed to be stifled after overseas units resumed operation. The performance of PSF and PFY market needs to see the improvement of domestic demand, while domestic demand may see limited growth. The polyester polymerization rate is estimated to be higher than the same period of last year in the second half of 2022 but may be not good compared with pre-pandemic level.