Polyester industrial yarn: processing spread hits yearly new low

The processing spread of PIY plants increased on the month in Sep, especially in the first half of Sep, when PIY producers revised up price. From late-Sep, with high inventory burden, PIY plants continued cutting price, ending up with shrinking processing spread. By Oct 20, the processing spread of chip-spun ordinary high-tenacity 1000D was around 1645yuan/mt (the processing cost is at 2500yuan/mt for reference), hitting yearly new low. PIY plants suffered heavy losses.

Oil price plunged during the National Day holiday. Polyester feedstock cost plunged after holiday, dragging down the prices of polyester products. In mid-Oct, although oil price was firm, PX market saw ample supply and demand and weak buying interest. The PXN was narrowed, which further weighed on PTA price to be in weak correction. Price of MEG was in range bound with tight-to-balanced supply and high inventory. Price of PET fiber chip was stable-and-weak with fragile feedstock cost. Downstream buyers were cautious in restocking under bearish mindset impacted by stable-and-weak cost. Coupled with high inventory, the price of PIY kept decreasing. Price of ordinary high-tenacity 1000D fell to around 8500yuan/mt by Oct 20 from 9100-9200yuan/mt in end-Sep, far bigger than the decrement of PET fiber chip. Thus, the processing spread of PIY was squeezed to be low.

In addition, Hengli's phase IV PIY unit with 200kt/year of capacity started operation in H2 Sep, which was a bearish news for market players, which might be one reason for large decrement of PIY prices. However, as its production of PET fiber chip is inadequate, Hengli's phase IV PIY unit uses PET fiber chip from the phase III units after the phase III plant cut production. Therefore, its production of PIY does not increase temporarily. Its phase IV PIY unit still runs at low capacity. However, Hengli's 300kt/year polyester industrial yarn grade PET fiber chip plant has commissioned production last week. After its production of polyester industrial yarn grade PET fiber chip grows, the output of PIY is likely to have big upward space. The competition is supposed to be fiercer by that time.

As for market outlook, the processing spread of PIY has hit yearly low. With strong support from cost side, the price of PIY may have limited downward space in short run, which is even likely to move up. In medium to long run, with intensified overcapacity, market competition is supposed to be fiercer and the processing spread of PIY is expected to refresh new low again in the future.