PET bottle chip, PFY and downstream plants witness falling operating rate

Recently, the operating rate of PFY plants and PET bottle chip producers decreased. The polyester polymerization rate has declined to below 89%.

Falling operating rate of PET bottle chip plants was mainly constrained by market fundamentals and the reduction was earlier than previous estimate. PET bottle chip capacity expanded substantially and downstream demand softened seasonally. Inventory of PET bottle chip was high and the processing spread has continued shrinking to below 400yuan/mt. PET bottle chip plants suffered losses. The operating rate of PET bottle chip plants was above 95% in end-Aug but declined to around 88% now, which may reduce further. Some PET bottle chip plants turned to produce PET fiber chip as price of PET fiber chip was higher.

Slipping run rate in PFY plants was mainly caused by non-fundamental issue. Since last weekend, around 2.18 million tons/year of PFY capacity (2.68 million tons of polymerization capacity) has been suspended or curtailed, which impacted around 5% of operating rate in direct-spun PFY market and near 3.5% of polymerization rate.

PFY market has witnessed better market fundamentals since Aug.

The stocks of DTY and grey fabrics were reducing and the operating rate of DTY plants, fabric mills and printing and dyeing plants gradually ascended to 84%, 80% and 83% respectively by Sep 22. The average operating rate of downstream plants in Sep 2023 was high compared with the same period of past years and the stocks of grey fabrics were low over the corresponding period of previous years. Falling inventory and high run rate was in line with the performance in peak-season this year in Sep, while small DTY producers and fabric mills still saw meager profit.

Polymerization cost remained high since late-Aug. PFY plants saw recovering profit while price of downstream products failed to chase up.

Impacted by the force majeure, some direct-spun and chip-spun PFY plants cut or suspended production and some DTY plants in Xiaoshan, Hangzhou also curtailed output. It is expected to affect around 2% of run rate in DTY plants in Zhejiang and Jiangsu while fabric mills and printing dyeing plants will not the impacted for the time being, which will see stable run rate.

In general, the operating rate of polyester market and downstream sector both reduces this week due to the pressure from supply and demand and force majeure. As for later trend, current inventory burden of PFY companies is not large, and the market is expected to gradually recover near Oct 8. PET bottle chip market is still estimated to see pressure later as many new units start operation and the supply is in glut.