PX price crazily surging, how about polyester products?

PX price has been under upward correction since May stimulated by various bullish factors and the uptrend strengthens in Jun, with increment far higher than that of crude oil and naphtha.

As downstream products failed to trace up the tempo on PX market, the spread of PX was especially good among the whole value chain. Among major polyester products, except for profitable PET bottle chip, PSF, PET fiber chip and polyester POY and FDY all suffered losses.

*POY cash flow =POY price-0.855*PTA+0.335*MEG+1250yuan/mt

PSF spread= PSF 1.4D price - 0.855*PTA-0.335*MEG-80yuan/mt (freight)  

PET bottle chip spread (excluding IPA cost)=PET bottle chip price-0.855*PTA+0.335*MEG.

Although the spot profit of polyester products rapidly weakened, inventory appreciated dramatically under increasing price. The losses of POY and FDY were heavy based on spot raw material price, while the cash flow of many plants has been during positive territory based on melting cost under 10-workday and 20-workday average feedstock price.  

The inventory of PFY has been transferred to downstream plants after restocking emerged, while the replenishment of PSF and polyester yarn was stable. PFY plants saw eased inventory burden periodically.

Compared with rising polyester plant operating rate, the operating rate of downstream DTY plants and fabric mills was not high. That meant the digestion of polyester products was slow. With great losses, the operating rate of DTY plants and fabric mills may recover limitedly in short run. Benefitted by the speculative demand, the contradiction of polyester demand is mitigated periodically. However, in long run, it may be hard for polyester enterprises and downstream plants to be profitable based on spot raw material prices.