Polyester filament companies cut production in advance under great losses

The polyester polymerization rate has been decreased to below 80% after companies cut more production. The operating rate of direct-spun PFY companies has been as low as 65% now.

Many enterprises were forced to scale down output after factoring into profit, inventory and demand issues.

Sharply falling end-user demand was the direct incentive for this production curtailment. With worse spread of pandemic since late-Oct, some trading markets were lockdown. Downstream orders could be described as tolerable after the National Day but decreased suddenly later. The operating rate of DTY plants and fabric mills fell to 60% from 70%.

Looking at the operating rate separately, it was not the yearly low, while market players worried some factories will be unable to reopen this year based on this timing. Some downstream plants were heard to start arranging their holiday schedule for the Lunar New Year, which intensifies the anxiety on the market.

PFY companies have tried their best to promote sales by cutting price since end-Oct. Actually, PFY producers have been under great losses since last week.

Taking POY150/48 as an example, the losses were above 600yuan/mt now, which was rare, only appeared in 2009, 2015 and 2020 and did not last long.

Note: the theoretical profit here is only for reference. The real cost may be higher in some factories.

However, sales still failed to improve under such low price when rigid demand was falling and speculative demand was subdued.

Nov is not an appropriate timing for production cut or suspension indeed, while the inventory burden will be hard to bear later if the production is not slashed now.

Currently, PFY market has been blocked. It is a helpless action to scale down production ahead to schedule. PFY producers hope to grasp some other chances by curtailing production actively and mitigating short-run contradiction.

External macro environment is not bad recently, and domestic market is anticipated to start improving, while the real economy needs more direct and practical policies, or needs more time to turn better. Entity enterprises cannot wait and are forced to suspend production temporarily.