Polyester polymerization rate trend forecast in Sep-Dec

Since the second half of July, polyester cash flow modestly enhanced, and market was destocking, polymerization rate gradually moved up from 77%. During which, there was periodical correction down due to power ration. In late-Aug, as the high temperature gradually declined and power restriction measures were alleviated, polymerization rate began to slowly pick up again. Market is soon entering the traditional peak season in Sep and Oct, players are more or less looking forward to a rebound in demand, so how much upward space is there for polymerization rate?

Compared with 2021, polyester industry chain may face more pressure in Sep-Dec 2022.End-user plants are facing high stock pressure, as inventory in weaving plants and polyester plants is higher than past year. Meanwhile, Sep-Oct demand may not fare better than past year either. Reasons are as follows: a. the spread of pandemic has not stopped. The dynamic zero-COVID policy affects travel and consumption. b. The residents witness falling income. Taking the textile workers as an example, their wages have been reduced by 20-30% due to poor business and descending run rate in 2022. c. As the real estate industry is expected to be hard to rise apparently in the second half of year, the consumption of home textiles may be dragged down. export demand has peaked in the second half of 2021 and has come down this year.

In Sep to the end of last year, polymerization rate mainly fluctuated within 81-88%, when PFY stock level was around 10-20 days. In Sep 2022, PFY stock is estimated at 20-30 days. In the future, end-user demand recovery may be limited, and the industry urgently need to destock, hence polymerization rate rebound shall also be limited. Assuming that the end-user demand is the same as last year, and if PFY inventory is to fall by an average of 10 days to reach last year’s level, then PFY O/R needs to reduce by an average of 8% in the remaining four months of the year. The average O/R of direct-spun PFY is estimated at 71% (79% on average from September to December last year).

As of last Friday, the polymerization rate was 82% and the direct-spun PFY O/R was 69%. According to the above assumptions, the average O/R of direct-spun PFY is assessed at 71%in Sep-Dec. Without considering O/R reduction of PSF and PET bottle chip industries, polymerization rate may average at 83% in the four months. From the point of view of the O/R trend, it may be slightly higher than the average from September to October, and lower than the average from November to December.