Big polyester companies' maintenance plan for LNY, unexpected but reasonable

According to the turnaround plan of polyester companies during the Lunar New Year (LNY) holiday announced by CCFGroup in early-Jan, around 5 million tons/year of polyester capacity would be cut or suspended. The lowest polyester polymerization rate was expected to emerge in early-Feb and near 84%, but may gradually rise near mid-Feb after some units restart operation.

At that time, leading polyester companies have not announced their turnaround plan for the Spring Festival holiday, so the maintenance of leading companies was not factoring into. Market players expected leading enterprises will not have turnaround or their turnaround will be small during holiday at that time.

However, after feedstock cost increased and downstream plants successively shut down for holiday from this week, polyester companies encounter increasing pressure from sales and profitability.

From the angle of downstream market, many downstream buyers intensively purchased PFY on last Friday and sales ratio of PFY was even above 400% on that day. Most downstream buyers have replenished enough PFY for the production before the Spring Festival holiday and many hold sidelined attitude toward the restocking after holiday. It was because most DTY plants and fabric mills do not have profit or even suffer losses based on spot PFY price. They may not willing to procure until PFY companies discount offers.

As for PFY plants, they are expected to face bigger pressure from mounting stocks as downstream plants will intensively start holiday in the next three weeks. Most are eager to sell, hoping downstream buyers to restock before the Spring Festival holiday. However, current polyester feedstock cost is high and the profit of PFY is meager, so PFY plants may not discount offers much. According to industrial average cost, only FDY are profitable. POY and PSF producers are under losses.

Xinfengming announced Spring Festival turnaround plan of polyester units on Jan 17, 2024: One 300kt/year of polyester unit in Jiangsu plans to shut down for turnaround on Jan 21, producing PSF; the plants in Tongxing and Pinghu each with 300kt/year of capacity plan to suspend production for turnaround on Feb 19, producing PFY. These units all will suspend production for around two weeks. In addition, 1-2 units of leading PFY companies may also plan to have turnaround, but the specific arrangement has not been confirmed or announced.

The announced turnaround plan of leading polyester companies for the Spring Festival holiday is more than anticipated but is still controllable. It can be described as normal turnaround as leading companies will arrange 1-2 units to have turnaround during some Spring Festival holiday before the COVID-19 pandemic. On one hand, it is to mitigate the inventory accumulation pressure during the holiday; on the other hand, these units really need to have maintenance.

According to the latest turnaround plan of polyester companies, CCFGroup expects the lowest polyester polymerization rate may reduce by 1 percentage point than last estimate to 83% in early-Feb. The average polyester polymerization rate in Jan and Feb is estimated to be around 89% and 85% respectively.