Polyester fiber market steps in positive track

In recent two weeks, the whole polyester fiber value chain has turned to be optimistic from being pessimistic.

In early-Dec, the spread of pandemic dampened demand. With high inventory, PFY plants and downstream factories continued cutting or suspending production to consume inventory before the Spring Festival holiday. The operating rate of fabric mills, DTY plants and direct-spun PFY companies once slipped to 30-40%, below 50% and above 50% respectively, hitting historic low at the same period.

The pandemic prevention and control policy became eased on Dec 3-4 and the operating rate of downstream plants rapidly recovered in Zhejiang and Jiangsu. Speculative procurement rapidly improved. As a result, the inventory of many sectors continued reducing. The profit of polyester fiber also restored.

The operating rate of DTY plants, fabric mills and printing and dyeing plants increased by 4%, 11% and 12% respectively to 52%, 47% and 56% respectively in Zhejiang and Jiangsu last week, but kept increasing this week.

The operating rate of polyester yarn plants increased to around 60% from 54% since Dec.

In Nov, players of different links exerted great efforts to lower finished goods inventory and narrow feedstock inventory, with modest speculative demand. However, downstream buyers obviously increased speculating since last week. The PFY stocks have been near 15 days in downstream sector. Some clients have prepared PFY stocks able to guarantee production for 30 days after the Spring Festival holiday. The inventory of PSF in polyester yarn plants also ascended to near 15 days from around one week.

As for inventory, the inventory of grey fabrics decreased again. The stocks were also sold out in small DTY producers. The inventory of polyester yarn was halved. The inventory of direct-spun POY, FDY and DTY in big companies was near 20 days.

Sales improved and inventory fell. The cash flow of PFY and PSF companies also improved and the improvement of PFY was the most prominent. Some PFY companies saw around 1000yuan/mt of losses in Nov but the cash flow has been turned to positive territory now.

Downstream players held diversified views toward later market trend now. Downstream players such as DTY producers hold relatively more positive attitude but PFY and PSF companies are cautious. Few companies raise run rate or restart operation by now. Only Tianlong plans to restart its 200kt/year PFY unit in end-Dec. The polyester polymerization rate is estimated to recover to above 69% in Dec.

If downstream speculation increases further, inventory of PFY and PSF reduces further and the cash flow of most varieties improves, some companies may show higher intention to ramp up run rate. However, if the speculation demand fails to improve, PFY and PSF companies may sustain current low operating rate.