Polyester: will downstream buyers have bottom-fishing before LNY holiday?

Some players in textile industry are discussing the replenishment before the Lunar New Year (LNY) when CCFGroup made on-site investigation. Will polyester downstream participants restock and have bottom-fishing before the LNY holiday?

Firstly, based on the inventory of grey fabrics, it has been reduced to yearly low after the release of demand in recent period. Most warp knitting mills have been out of stocks. With low inventory, only if the collection of payment is smooth before the LNY holiday, downstream buyers are likely to replenish and have bargain-hunting.

Secondly, in terms of PFY prices, it has declined by above 1000yuan/mt since end-Sep and current prices have hit yearly low. Polyester feedstock price decreases further recently. If PFY prices trace the downtrend later, PFY prices may be lower than the yearly low. Many fabric mills see recovering profit recently. If PFY prices are low before the LNY holiday, many downstream buyers may have bottom-fishing and restock.

Finally, as for the supply and demand of PFY, there are only 3 new PFY units undue plan in 2024, with total capacity at 1160kt/year. One unit with 500kt/year of capacity is scheduled to start operation in end-2024. Therefore, the actual PFY capacity increment may be only at 660kt/year. In addition, at least 200kt/year of capacity will be eliminated in 2024. That means the net increase of PFY capacity will be very limited. However, end-user demand is climbing up slowly. PFY industry is estimated to see improving supply and demand in 2024. Therefore, if oil price does not drop much, low-priced PFY at the end of 2023 may enjoy cost performance.

In general, downstream plants witness growing profit and low inventory of finished goods and PFY. In addition, PFY price has hit yearly low. Downstream buyers are likely to have bottom-fishing before the LNY holiday, while the strength depends on the cooperation of orders. Dec-Jan will be a discussion period for orders in 2024, which should be noted. If downstream plants see sound orders, they may restock raw material in a large scale.