PFY inventory may rise in Aug amid weaker downstream market

Downstream market has witnessed weaker new orders since last week. New orders for warp knitting, circular knitting and water-jet fabrics still tended to weaken this week. Meanwhile, domestic sales and export of grey fabric and finished goods decreased. Therefore, fabric mills saw faster inventory accumulation.

Stocks of woven and knitted fabrics have been high, with that of water-jet plants mainly at 1-2 months, higher above 3 months, that of warp knitting ones mainly around 20-30 days and that of circular knitting ones at above 20 days. Fabric traders replenished before. Feedstock inventory of fabric traders and dyeing plants has been high.

Fabric traders and producers may face capital pressure later amid high inventory.

Some fabric mills needed to use spandex and they encountered surging cost pressure with hiking spandex price.

In addition, the pandemic worsened in some regions of China including Yangzhou, Nanjing, Suqian and Huaihai from Jiangsu, Chengdu and Yibin from Sichuan, Shenyang from Liaoning, Zhangjiajie, Changsha and Zhuzhou from Hunan, Wuhan and Huanggan from Hubei, Xiamen from Fujian, Zhengzhou and Shangqiu from Henan etc. Transportation was stifled due the spread of the pandemic. Therefore, some consumption markets were actually under semi-closed state. Fabric mills became more cautious in production.

Therefore, operating rate of fabric mills and printing and dyeing plants dropped in Zhejiang and Jiangsu this week while that of twisting plants remained stable.

Operating rate of twisting plants sustained at 94% in Zhejiang and Jiangsu: above 90% in Xiaoshan, Shaoxing, Changshu, Cixi, Taicang and Changxing.

Operating rate of fabric mills slipped to 79% in Zhejiang and Jiangsu, near 80-90% for warp knitting plants in Changshu, around 80% for water-jet plants in Haining and Siyang, below 60% for circular knitting plants in Xiaoshan and Shaoxing and above 80% for water-jet mills in Wujiang.

Operating rate of dyeing plants dropped to 83% this week in Zhejiang and Jiangsu, around 90% in Xiaoshan and Shaoxing, near 80-90% in Wujiang and Changshu, around 80% in Haining and North Jiangsu and around 60% in Changxing.

Downstream plants were cautious in purchasing PFY in Zhejiang and Jiangsu, focusing on digesting PFY purchased before. Some purchased when PFY price was discounted on Aug 5. By now, the PFY prepared in downstream plants can guarantee production until the second half of Aug.

The performance was not poor during the traditional slack season in Jun-Jul while the appearance may be not good in Aug during the traditional peak season.

Currently, crude oil and polyester feedstock markets are sluggish. Downstream buyers see lower run rate and cautious replenishment. Therefore, stocks of PFY are expected to be under upward track in Aug.