2021 market review of PFY, NFY and spandex & 2022 outlook

Spandex outperformed in 2021 compared with nylon and polyester fibers.

Spandex witnessed the highest profit, with profit of spandex 40D as high as 10,000-20,000yuan/mt. The cash flow of polyester POY 150D and FDY 150D was at 370yuan/mt and 30yuan/mt respectively after cost moved up. FDY saw apparently weaker cash flow. However, the cash flow of NFY POY 70D and FDY 70D was at 90yuan/mt and 290yuan/mt respectively. High-end NFY was popular in 2021, mainly covering FDY and some DTY. Therefore, the actual profit of most companies was much higher than conventional 70D. However, PFY was mostly conventional products and the competition was fierce under homogenization. Thus, the profit of NFY was not worse than that of PFY and the profit of nylon FDY was relatively better.

Demand for polyester, nylon and spandex weakened after being strong in 2021: domestic and export both saw big improvement in the first half of 2021 with loose macro policies and recovering economy amid eased spread of pandemic. In the second half of year, downstream players concentrated on consuming stocks amid the Dual Control of energy consumption and volatile feedstock price. In addition, demand and production marginally decreased outside China and domestic demand for fibers presented sluggish.

Demand for fibers may see falling growth rate in 2022. On one hand, the spread of pandemic is continuing in local China. The economic pressure intensifies. Downward real estate industry and stagnation coexists. Economy may have limited further upward space amid high cardinal number. Domestic consumption of textiles and apparels is expected to see falling growth rate than 2021. On the other hand, loose monetary policy outside China may gradually withdrawal. Replenishment from US and Europe is anticipated to reduce. With alleviated pandemic outside China, the production of textiles and apparels has recovered in Southeast Asia. That means the replacement effect of China to Southeast Asia may weaken. Exports of textiles and apparels may fall from high growth rate in 2022.

The absolute price of chemicals, including chemical fibers, will mainly depend on the energy and monetary issue in 2022, which are expected to be in weak consolidation.

Monetary level: Outside China, as the Federal Reserve may raise the interest rate, most countries around the world will follow, which is expected to end up with tightening monetary; Within China, in order to stabilize the economy, macro policies are anticipated to be slightly looser at the beginning of the year, and the downside risks of the economy are slightly alleviated, thus forming a certain hedge against the adverse effects of interest rate increases abroad.

Energy level: price of coal is estimated to be within normal range in 2022 after a series of policy adjustment, with falling risk of sharp fluctuation. However, domestic supply is not completely loose in China. As for crude oil, with the gradual fading of supply chain constraints, the high level of crude oil prices may have been basically clear without other unexpected shocks, but the improvement in supply and demand in the first half of the year may still be gradual. Especially in the context of low energy stocks, intensification upsurge is not ruled out. Therefore, price of crude oil is still possible to maintain a wide range of consolidation. In the second half of 2022, price of crude oil may face more pressure in expectation of increasing supply, the raise of interest rate and falling growth rate of demand.

In terms of supply and profit, the capacity of spandex will increase the most in 2022. Thus, the profit of spandex is expected to reduce from high level. The capacity of nylon fiber is the smallest. If enterprises operate appropriately, the profit is supposed to sustain. As for PFY market, the profit is likely to shrink amid weak demand and high capacity expansion. However, the capacity expansion on upstream feedstock market is large, which will weigh on feedstock price and be supportive to the profit of PFY. PFY is likely to enjoy price advantage among major chemical fibers. As for the varieties, the profit of polyester FDY may be worse than that of POY with not high capacity concentration ratio and worse industrial cooperation. On the contrary, the profit of nylon FDY will be better than that of POY supported by demand.