Polyester polymerization rate expectation corrected after the Asian Games postponed?

Following detailed discussions with the Chinese Olympic Committee (COC) and the Hangzhou Asian Games Organising Committee (HAGOC), the Olympic Council of Asia (OCA) Executive Board Friday decided to postpone the 19th Asian Games, which were scheduled to be held in Hangzhou, China, from 10 to 25 September 2022.

The delay of the Asian Games will directly affect the operating rate and production on polyester value chain.

At the beginning of 2022, considering that the Asian Games may affect the polyester polymerization rate near Zhejiang (learn from the experience of the G20 Summit in 2016) and the operating rate sustained low for a long period in the fourth quarter of 2021, we expect the polyester polymerization rate to keep high in the first half of 2022 and the run rate may be lower than the yearly average in Aug-Oct.

However, the actual trend was different.

The polyester polymerization rate was high in Q1 2022 despite of high stocks and feeble demand, largely consistent with expectation. Therefore, the dispute of production curtailment on polyester market kept escalating.

In the second quarter, many factories on upstream and downstream market cut output as the transportation was stifled due to the spread of pandemic. The polyester polymerization rate was as high as near 92% in early-Apr and dropped to as low as 78%, shivering near 80% in end-Apr/early-May.

As the spread of pandemic is still undergoing, the polyester polymerization rate is cautiously estimated to recover to 86-87% by end-May, which may sustain in Jun (Demand may moderately recover but market is still during off-season). The polyester production may see a big negative growth in Q2 and zero growth may appear in the first half of year.

The news of postponed 19th Asian Games is estimated to affect market expectation to a certain extent. The polyester polymerization rate in Q3 is likely to be revised up theoretically. However, the hold of meeting is not the unique influencing factor as demand is the root. Only when sales gradually become smooth and the accounts are collected will the polyester production improve fundamentally. Otherwise, companies are still estimated to control run rate and operate cautiously.