Price of PIY surges supported by low operating rate

Domestic offers of polyester industrial yarn moved up on Oct 26, with quotations for ordinary high-tenacity 1000D, low-shrinkage ones, adhesive activated and HMLS ones at 10,300yuan/mt, by cash EXW, 11,300yuan/mt by 3month acceptance, 11,000yuan/mt by cash EXW, and 13,000yuan/mt by cash EXW respectively. Export offers of PIY also rose, with quotations for ordinary high-tenacity 1000D, low-shrinkage ones, adhesive activated and HMLS ones at $1,440/mt, $1,570/mt, $1,530/mt and $1,810/mt respectively. In addition, price of polyester cord fabric and canvas also hiked with falling stocks and soaring cost. What's the reasons for increasing price?

In terms of the operating rate, the operating rate of PIY plants decreased dramatically to historic low in Sep-Oct affected by the regulation of energy consumption. By Oct 21, theoretical operating rate of PIY plants dropped to near 53%, only higher than the level in Feb-Mar of 2020 amid the COVID-19 pandemic. The monthly average run rate of Oct will also hit historic low, only next to the level in Feb-Mar of 2020. As a result, the production of PIY reduced substantially while downstream buyers increased replenishing with rising prices of PIY. Under such circumstance, monthly sales ratio of PIY was above 100% and PIY producers witnessed apparently decreasing stocks and tight delivery, which strongly pushed up price.

As for the cash flow, it was during negative territory previously in 2021 with excessive supply after some new units started operation since last year, which kept refreshing new low. Recently, the cash flow recovered after PIY price moved up while chip-spun PIY was still not profitable. Based on spot price, price of bright PET fiber chip was at 7,300yuan/mt, trading price of ordinary high-tenacity PIY 1000D was mostly pegged at 9,500yuan/mt, and the processing fee was at 2,200yuan/mt. Losses of PIY were near 300-400yuan/mt. According to the monthly average price, monthly average price of PIY was at 9,300yuan/mt by Oct 26 and that of bright PET fiber chip was at 7,850yuan/mt, 3-month by acceptance, with the processing fee at around 2,000yuan/mt. The Oct settlement price of bright fiber chip in Sinopec was at 7,850yuan/mt, 3-month by acceptance, and the processing fee of PIY was even lower at 1,500yuan/mt, with serious deficit. PIY plants that purchased fiber chip under contractual basis suffered more serious losses as the settlement price of PET fiber chip was high. Therefore, PIY plants hoped to improve their processing fee by raising price amid losses.

However, although offers of PIY rose greatly and PIY plants were profitable rather than suffering losses based on current offers, actual transactions were rare as downstream buyers showed sidelined attitude with PIY stocks prepared before at hand and polyester feedstock cost and price of PET fiber chip decreased. If PIY plants keep running at low capacity, the processing fee of PIY may improve later. Transactions of PIY may be scarce under high price.