Polyester polymerization rate: pay attention to the production curtailment of PSF and PET fiber chip

The polyester melting cost was firm and increased by 6% last week although price of crude oil decreased by 7-8%.

Sales of PFY kept increasing on the month with higher cost and better demand. The average sales ratio approached as high as 500% on last Wednesday, at above 200% on last Saturday and above 100% on Monday.

As for the demand side, the operating rate of DTY plants, fabric mills and printing and dyeing plants increased to 77%, 66% and 72% respectively by last Friday, up by 38%, 27% and 23% respectively compared with the low level in Aug, which is likely to increase to 80%, 70% and 70-80% respectively this week. Rigid demand for PFY grew and speculative demand also improved with increasing feedstock cost. The PFY stocks of downstream plants advanced to near 15 days from below 5 days. PFY inventory burden has been transferred to downstream market.

As for the cost sector, as the polyester polymerization rate is expected to rise in Sep, stocks of PTA and MEG are estimated to reduce.

In terms of circulation of spot goods, PTA supply is supposed to be tight when PX supply tightens, the PTA-PX spread is near 1,000yuan/mt, the operating rate of PTA plants is below 70%, some suppliers shrink supplying and the delivery of futures is undergoing.

The decrease in stocks may last longer and may be more than expected on MEG market, in anticipation of delayed restarts of coal-based MEG units. Coupled with unexpected rate cut/unit shutdown, market confidence has improved.

In addition, the typhoon affected the delivery and pick-up of cargos at ports this week.

Higher cost stimulated sales but also posed pressure on polyester market.

On one hand, feedstock price surges while downstream market fails to chase up well. That meant feedstock producers achieved higher profit. The PTA-PX spread has been above 1,000yuan/mt, while PET fiber chip, PFY and PSF plants have suffered losses, except for profitable PET bottle chip. The whole polyester value chain is dominated by strong feedstock market but weak downstream sector now. The profit of polyester products is apparently meager.

On the other hand, buyers are cautious in purchasing feedstock under high price. Some PTA plants shrank supply under contractual basis. Polyester feedstock cost increases faster than polyester products. The inventory of polyester plants may appreciate in short run but will also face big risk to depreciate in the future.

Some polyester plants have scaled down production or intend to slash run rate. PET fiber chip and PSF plants faced relatively bigger pressure to cut production compared with PFY producers. The polyester polymerization rate was estimated to ascend while it faces pressure with rapidly soaring feedstock price.

To keep profitable, polyester companies also need to quickly chase up when feedstock cost surges rapidly. However, spiking price of PFY may affect the placement of downstream orders to a certain extent.