Polyester downstream: last pre-holiday replenishment comes to an end

PFY plants cut price for promotion this week after sales being sluggish for a period. Downstream plants started replenishing for the post-holiday production. Lianda discounted price by 300yuan/mt on Tuesday, with sales ratio of PFY as high as 700%. Some plants in Ningbo slashed price by 300yuan/mt together on Wednesday, with sales ratio at around 1500% that day. On Thursday, some leading POY plants cut price, with sales ratio at around 400-700%, higher at 1000% on Thursday. Stocks of PFY declined to low level after this round of promotion, and most downstream players finished their last pre-holiday restocking. Feedstock inventory of downstream plants was near 20 days, close to the level during the same period of last year. PFY price is low this year and some plants have not discounted offers temporarily. In addition, some downstream buyers still need to replenish. Average procurement volume still has upward space but the increment may be limited.

Operating rate of downstream fabric mills declines faster than past years as many non-local workers went home for the Spring Festival holiday in advance affected by the pandemic. Operating rate of fabric mills is at 25% now, which is 20% lower than the corresponding period of past years (15 days ahead of the Lunar Chinese New Year). Warp knitting plants still run at 80% of capacity in Haining now and they intend to shut down for holiday intensively in end-Jan. Operating rate of downstream plants is below 10% in other regions and the production has been almost suspended.

As for the resumption after holiday, downstream plants are expected to resume operation intensively in early-Mar based on the isolation standard in many regions. Some workers that do not go home for holiday may restart operation in advance in end-Feb, but the run rate may be below 30%. Production resumption may be later after the Spring Festival holiday.

All in all, pre-holiday replenishment of downstream market has come to an end. Impacted by the pandemic, downstream plants put their holiday schedule ahead of schedule and their post-holiday restart is expected to be postponed. That means around 1-month of rigid demand for PFY will be affected and sales of PFY are supposed to be sluggish in Feb. Meanwhile, the turnaround scale of polyester plants is smaller than past years, so the polyester polymerization rate is likely to be higher than past years. Thus, stocks of polyester fibers are likely to accumulate in Feb. Polyester plants that curtail production in a small scale or those do not shut down during the Spring Festival holiday may face inventory burden.

As for the post-holiday market, the recovery of end-user demand is decisive to market tendency. Grey fabric market has been closed now with scarce new orders and transactions. Sales are almost in deadlock in fabric mills as most dyeing plants have started holiday. All in all, players hold optimistic view toward orders in the first half of 2021. Downstream orders for some home textiles are moderate, while those for apparels are muted. Later demand needs to observe the orders after the Spring Festival holiday. If downstream orders are sound as expected, PFY price may keep rising. If demand recovers worse than anticipated, price of PFY is expected to head south.