Polyester fiber plants' operating rate to be suppressed in Q4

Polyester cost and price of polyester products increased during the National Day holiday, with increment of WTI crude oil, polyester feedstock cost and polyester POY150D at 17%, 5% and 4% respectively. On one hand, some PTA and MEG units resumed operation and there are new PTA and MEG units to be launched. On the other hand, the operating rate of downstream plants remained largely flat after holiday. Demand does not stimulate price temporarily.

Therefore, the profit of polyester products did not improve apparently. PFY plants were still under losses. The losses of mainstream POY and FDY were at 100-300yuan/mt. The cash flow of PET bottle chip deteriorated further. PSF plants turned to be profitable while the deficit of polyester spun yarn expanded to near 700-900yuan/mt. In the whole value chain, except for PX having a good profit, polyester feedstock and polyester products all witnessed meager profit.

By Oct 10, the inventory of PFY plants was basically flat with that in end-Sep or slightly climbed up, which was mainly because downstream plants replenished after crude oil price quickly advanced and PFY price also chased up in the later period of National Day holiday. The operating rate of DTY plants, fabric mills, printing and dyeing plants changed little after the National Day holiday compared with pre-holiday level but some plants suspended production for a short period in early-Oct. The comprehensive inventory of PFY slightly piled up compared with pre-holiday level, which still hit yearly high.

The inventory of grey fabrics inched down boosted by seasonal demand while the destocking speed was slower in Sep compared with past years. Seasonal demand for some varieties is expected to rise on the month but the operating rate of DTY plants and fabric mills may meet resistance in rising later, which is estimated to be around 65% and 75% in Oct, slightly lower than that in Sep. Speculative demand for PFY is still likely to be impacted by the feedstock price trend and PFY price at the end of month. If feedstock price falls back, end-users may turn to focus on digesting PFY prepared before again and PFY inventory will accumulate.

The inventory of PSF was mainly near 20-25 days since Sep.

The inventory of PSF and PFY is unlikely to reduce depending on demand recovery in Nov and Dec. On one hand, the consumption both in China and outside China will be affected by falling macro economy; on the other hand, companies show inadequate confidence.

In general, PSF, PFY and downstream plants may continue concentrating on destocking in Oct and even in Q4. Otherwise, if spot cost decreases, factories may be hard to be profitable from suffering losses when the high inventory weighs on market.  PFY companies are expected to keep controlling their operating rate to control inventory as demand is expected to be hard to grow.

The operating rate of direct-spun PFY and PSF plants is low now. The run rate of PFY producers was lower than the average level in 2019-2021, and that of PSF plants was lower than the same period of 2019 and 2020 but was slightly higher than that in the corresponding period of 2021. The operating rate of PFY plants is estimated to be in downward correction in Q4, especially at the end of year when seasonal demand will weaken. The run rate of PSF plants may be hard to have ongoing upward momentum, which may be lower than that in Q4 2021.

The production of PFY and PSF both reduced by around 7 percentage points on the year in Q1-Q3, 2022. The operating rate of PFY and PSF plants in Q4 will be lower than that in the corresponding period of 2021. PSF and PFY output may see expanding negative growth throughout 2022, with reduction at more than 8%.