Polyester: downstream buyers waiting for opportunity to buying dip

Downstream fabric mills witnessed apparently falling stocks and improving profit in Sep-Oct impacted by diversified supply and demand when the consumption of energy was limited and downstream demand grew. Some fabric traders and apparel producers placed orders in panic as domestic seasonal demand was moderate in Sep-Oct, the purchasing cost of fabric surged and the delivery took apparently longer time, worrying fabric price to continue rising and the Dual Control of energy consumption to last into end-2021.

Downstream buyers have presented obviously weaker purchasing interest since late-Oct when the regulation of electricity consumption eased in Zhejiang and Jiangsu and upstream feedstock price plunged. Fabric mills received limited new orders recently and some even did not have any orders due to the following 3 reasons: firstly, fabric traders worried price to collapse. Secondly, supply recovered in fabric mills and printing and dyeing plants with mitigated regulation of energy consumption. Thirdly, the intensive order placement for the online shopping spree in Nov has been ended. Some oral orders have been canceled. Offers for grey fabric softened rapidly with alleviated regulation of energy consumption and rapidly reducing feedstock prices. Taking nylon taffeta, which was very tight earlier, as an example, it could be sold under 5.5yuan/meter but has decreased by 30% to 3.8yuan/meter. Spot supply of nylon taffeta has started increasing.

Downstream players, who were the biggest benefit in Sep-Oct with the regulation of energy consumption and rising prices, did not face pressure temporarily. Stocks of fabric were very high in end-Aug and early-Sep but have reduced a lot. With alleviated regulation of energy consumption,operating rate increased again and end-user demand marginally weakened. That meant stocks of grey fabrics tend to accumulate again, which is rising slowly now. According to the survey made by CCFGroup, orders of downstream plants can mainly guarantee the production until mid-Nov or even into end-Nov. Therefore, inventory of grey fabric may start mounting until mid-Nov.

Fabric mills and twisting units do not face big burden now but most are cautious in purchasing PFY, mostly to cover the most pressing demand amid high PFY price. Buyers showed low buying interest even when price of PFY was discounted by 1,000yuan/mt, expecting PFY price to have downward risk amid high cash flow. Fabric traders and fabric producers mainly retreat to sideline. Therefore, sales of PFY and orders of fabrics are meager.

Downstream buyers may tend to have bottom-fishing but they are waiting for the appropriate opportunity. Downstream speculative procurement is likely to improve slowly if PFY price keeps falling. PFY stocks of most downstream plants can guarantee production until mid-Nov, so sales of PFY may improve until late-Nov and large-scaled bargain-hunting will not appear before end-Nov. Although plunging feedstock prices impact the whole value chain for a short period, downstream plants may continue having the courage to hoard up stocks in long run to ensure their operating rate.