Nylon filament glut bottoming out?

Since nylon filament yarn (NFY) industry entered the off-season, the market has remained sluggish, and pressure on filament producers has continued to mount. This year, the addition of significant new capacity has accelerated industry oversupply, intensified rat race (involution), and led to losses and subsequent production cuts.

1. Persistently weak demand, high inventory levels at NFY plants

Since the gradual onset of the off-season in June, demand has continued to weaken, and filament producers' inventories have kept rising. Between July and August, it was common for producers to hold 40–60 days of inventory, with very few managing to keep levels relatively low at 30–35 days. By the end of August, the industry's average inventory had risen to around 44 days, surpassing 2022 levels and hitting the highest inventory point for the same period in recent years.

During this time, even though NFY prices fell to historical lows, it did not stimulate any speculative demand from downstream buyers. This was mainly because weaving and knitting mills had no order improvement and stayed cautious, watching the trend of nylon prices rising and falling sharply over the past year.

This also explains why the rise in raw material prices from late July to early August did not lead to any improvement in nylon filament transactions. Of course, after just a week of increase, raw material prices began to weaken again, confirming downstream expectations that the upward trend was not sustainable. Even as filament prices continued to fall and losses widened, weaving and knitting mills remained hesitant to purchase nylon filament, sticking to just-in-time buying for immediate needs.

2. To reduce pressure, filament producers expand production cuts

With continuous inventory buildup and mounting losses, more filament producers have succumbed to pressure and gradually reduced production. Since production cuts began in early July, the industry's average operating rate has dropped from 87% to around 78%, which is about 6% and 13% lower than the same periods in 2023 and 2024, respectively, though still higher than the same period in 2022.

However, these ongoing production cuts over the past two months have only slowed the rate of inventory accumulation rather than effectively reducing inventory levels. The market remains well-supplied, and even with rising raw material costs, nylon filament prices have repeatedly hit new lows. This is one reason why weaving and knitting mills are reluctant to build up nylon inventory.

3. Diverging conditions among downstream weaving and knitting mills, domestic orders remain relatively weak

The extent of the off-season demand slump is also reflected in changes in the operating rates of weaving and knitting mills. Between June and July, operating rates for circular knitting, water-jet looms, and warp knitting declined by 5–10%. Starting in August, differences began to emerge across various downstream sectors: water-jet loom operating rates stabilized, circular knitting rates saw a slight rebound of 5–6%, while warp knitting rates continued to decline modestly. This indicates that production demand in some sectors has already shown signs of recovery.

The above describes the overall situation across weaving and knitting markets. From the perspective of nylon application segments, there are currently no signs of increased purchasing of nylon filament, especially in the domestic market, which remains subdued. Some export-oriented weaving and knitting mills have seen a moderate rebound in orders.

Nevertheless, with operating rates in certain segments of the broader weaving and knitting market starting to recover slightly, it may only be a matter of time before demand for nylon picks up. At the very least, at this stage of weakest demand, looking ahead to September, it is unlikely to worsen further. The industry's darkest phase may be nearing its end, and close attention should be paid to downstream production changes.