Polyester companies surrender partial profit amid weaker demand

Polyester plants who saw stable profit before started suffering losses recently.

Prices of feedstock and products were diversified in late-Oct. Price of feedstock rebounded affected by warmer domestic commodity market, pushing up polymerization cost. However, prices of polyester products were weak and the corresponding processing spread gradually narrowed. Based on the spot price on last Friday, the processing spread of POY was below 900yuan/mt, that of PSF was below 1000yuan/mt and that of PET bottle chip was lower than 500yuan/mt. Major polyester products have been unprofitable.

Such situation was not completely attributed to firm feedstock market. Actually, the price spread of feedstock only recovered to medium level, with PTA-PX spread recovering to 350yuan/mt or above and PXN shrinking to $350 and then rebounding). Squeezing processing spread of polyester products was due to weaker prices and sales.

Stocks of polyester products accumulated after the National Day holiday. Sales improved periodically, while the overall inventory was hard to return to the pre-holiday level.

Speculative demand from downstream market was inadequate when oil price retreater from high level in Oct and demand has been near peak. Most mainly purchased raw materials on a need-to-basis. In end-Oct, PFY plants expanded discounts and PFY prices hit yearly low. Under such circumstance, sales of PFY grew intensively. After seasonal demand falls, the inventory tends to increase. From this angle, discounting price for promotion may be the focus of later work.

Fortunately, downstream plants still ran stably although orders weakened in some companies. The inventory accumulation of downstream market was not fast. Downstream buyers were more sensitive to the low price. Therefore, theoretically, only if the price is appropriate, the operating rate of downstream plants may be later in reducing and rigid demand for polyester products may be ensured.

However, the profit of polyester products may moderately reduce later under such circumstance. Prices of polyester products are expected to be weak and the later cost trend is crucial for the profitability.

Among polyester products, the operating rate of PET bottle chip plants gradually decreases in the second half of 2023 after the price spread collapses, which has been lower than 80%. The run rate of PFY and PSF producers is steady for the time being and may remain for a short period if companies can promote sales by cutting price. If later demand softens further, their run rate may be under pressure.