Polyester industrial yarn O/R may decrease again after increased

Polyester industrial yarn plants ramped up run rate after the Spring Festival holiday but some companies slashed production again due to poor profit and the spread of pandemic. Some factories such as Haining Kingsway and Shanghai Wenlong suspended production. As a result, the operating rate of PIY plants substantially declined to around 57% in late-Mar/early-Apr, lower than the level during the Spring Festival holiday. In May, with eased pandemic and improving logistics, the operating rate of PIY plants ascended after Shanghai Wenlong resumed operation, and Guxiandao, Hengli and Oriental Industries raised run rate.

Except for better controlled pandemic, increasing operating rate of PIY industry may be attributed to the turnaround plan of Unifull too. Unifull intends to start maintenance on May 25 for around 15 days, covering 300kt/year of capacity, including 200kt/year of melt-spun and 100kt/year of chip-spun PIY. The overall operating rate of PIY plants will drop dramatically after Unifull had turnaround. Therefore, some companies ramped up run rate to reduce the effect of falling supply. However, the market competition will escalate again after Unifull resumed operation from short-term turnaround.

The processing fee of PIY continued shivering at low level in recent one month, and the losses were heavy. After Unifull started having turnaround, the processing fee is expected to grow moderately after supply/demand pattern improved. However, the contradiction between supply and demand will intensify again after Unifull resumed operation from turnaround soon but other plants do not scale down production. The processing fee of PIY is likely to be squeezed to low level again.

All in all, downstream orders are expected to be weak in the first half of 2022. PIY market has excessive capacity. Affected by supply/demand contradiction, the profit of PIY is meager and operating rate of PIY plants consolidates around low level. Once operating rate apparently increases and sales pressure enlarges, the deficit is expected to increase. Therefore, the overall operating rate of PIY plants should not be too high. As new PIY capacity is limited in 2022, if demand warms up in the second half of year, PIY market may see improving performance by that time compared with H1.