Polyester: pandemic in Suzhou exacerbates weak downstream demand

The spread of pandemic in Suzhou, Jiangsu and weak orders weighed on the recovery of operating rate in DTY plants, fabric mills and printing and dyeing plants.

Operating rate of DTY plants increased to 67% in Zhejiang and Jiangsu: near 80% in Xiaoshan and Shaoxing, near 70-80% in Changshu and Taicang, below 60% in Changxing and near 50% Cixi.

Operating rate of fabric mills advanced to 50% in Zhejiang and Jiangsu: at 50% in Wujiang (but some plants slash run rate as the spread of pandemic impacts the recruitment of workers), at 60-70% in North Jiangsu, around 60% in Haining and near 30% in warp knitting plants in Changshu, around 60% for water-jet mills in Changxing and near 30-40% for circular knitting in Xiaoshan and Shaoxing.

Operating rate of dyeing plants climbed up to 49% this week in Zhejiang and Jiangsu: around 50% for plants in Wujiang, Xiaoshan, Shaoxing and Changxing, around 20% in Changshu, at 60-70% in Haining and around 70% in North Jiangsu.

By convention, many downstream plants will resume operation after the Lantern Festival (the 15th day of the first lunar month), while the resumption this year was worse than last year. Compared with 2018-2019, DTY plants and yarn producers recovered relatively better while fabric mills were slow in restarting.

According to Baidu's migration index before and after the Spring Festival, the overall migration before the 15th day of the first lunar month was less than that in 2019.

As for the influence of pandemic in Suzhou, Jiangsu, current operating rate of fabric mills has been lower than 2018, 2019 and 2021, which was very low in 2020 due to the outbreak of COVID-19 pandemic. Last week, some water-jet plants in Wujiang met difficulty in restarting affected by the sewage pipe treatment problem. This week, the recruitment of workers was suspended and the regulation of logistics hindered the transportation of feedstock and products due to the spread of pandemic. Some plants saw falling run rate.

It is expected that there will be difficulties in the resumption of water-jet plants in Wujiang in the next 10 days or so with low migration movement. In addition, the sewage pipe treatment operation may also be extended, which will affect the resumption of some enterprises in Mar.

Most downstream plants focused on consuming PFY prepared before impacted by the spread of pandemic and modest orders. The polyester polymerization rate has rapidly recovered, which was at 88.8% by Feb 17, higher than 88.6% during the same lunar period of last year. Polyester enterprises saw fast inventory accumulation. Current PFY stocks have been higher than the high level in 2021.

Price of PTA, MEG, PFY and PSF all fell when crude oil price was in range bound and downstream demand improved worse than anticipated. As for the futures market, price of MEG and PSF futures has been lower than the low level before Spring Festival and that of PTA futures has been close to the low price before holiday. Price of PFY was discounted and some plants revised down offers and that of PET bottle chip was close to the price before holiday. If demand for polyester products remains worse than anticipated in Mar, the polyester polymerization rate is likely to retreat from high level.