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Q4 may be the toughest period for PFY companies

2022-11-30 08:22:17 CCFGroup

The fourth quarter of 2022 may be the toughest period for PFY companies in years.

Inadequate rigid demand: downstream plants start holiday in advance during the traditional peak season. The run rate of DTY plants and fabric mills decreased to near 60% and 50% respectively in Nov in Zhejiang and Jiangsu.

Lacking speculative demand: price of Brent crude oil shivered above $90/bbl, but that of PFY has hit multi-year new low. Price of POY150D/48F consolidated near 7000yuan/mt since end-Oct. However, downstream plants slashed run rate when demand was insufficient and the capital failed to be recouped. Low-priced PFY attracted some procurement, and the stimulus was not strong.

High inventory waiting for being consumed: the inventory of POY shivered around 0-20 days in history, mostly around 10 days. The inventory of POY was higher than 30 days in early-2020 when the COVID-19 pandemic broke out but was consumed in mid-2020. This year, POY inventory sustained high.

1. The postpone of new units:

Some new PFY units and some plants which are delayed before, near 1,700kt/year of direct-spun capacity, have been confirmed to be postponed in Nov and Dec.

2. The curtailment of production

The operating rate of direct-spun PFY companies accelerated falling since Nov, down to around 62% now from 72.6% in early-Nov. Some direct-spun PFY producers have suspended production for holiday.

Some PFY plants announced to have turnaround or scale down output in H2 Nov and Dec.

The operating rate of direct-spun PFY companies is estimated to be near 50% in end-Dec, near the level in Feb, 2020 amid the outbreak of pandemic.

PFY plants' operation change and plan since Nov
Company	Capacity involved (kt)	Shutdown	Expected restarting time	Product	Remark
Jinsheng	120	4-Nov	After LNY	PFY+PSF	T/A
Tongkun	510	Mid-Nov		PFY	O/R reduction
Xinxin	100	13-Nov		PFY	T/A
Quandi	250	15-Nov	After LNY	PFY	T/A
Xinfengming	300	16-Nov		PFY	T/A
Xinfengming	900	Before LNY		PFY	T/A
Huaxing	250	End-Nov		PFY	T/A
Hongtai	250	End-Nov			T/A
Tiansheng	400	/	End-Nov	PET fiber chip	Restart
Tiansheng	400	End-Nov		PFY	T/A
Juxing	200	1-Dec	1-Apr	PFY	Shutdown for transformation
Xianglu	380	End-Dec/early-Dec		PFY+PSF	T/A
Jiabao	400	18-Dec	29-Jan	PFY	T/A
Lixin	175	End-Dec	After LNY	PFY+PET fiber chip	T/A
Tiansheng	600	Jan		PFY+PET fiber chip	T/A
Note: based on units with 100kt/year of capacity. LNY is short for Lunar New Year.

3. Sales under losses

PFY companies were thought to suffer great losses if sales were concluded under 300-500yuan/mt of deficit. However, the losses of PFY were mainly around 500-700yuan/mt in Nov, even higher at 800-900yuan/mt, continuing refreshing new high.

After factoring into the depreciation of PFY inventory, the selling price and yearly average price of POY150D was above 1,000yuan/mt since Nov.

By now, PFY inventory has descended, with inventory of POY+FDY near 25 days now, down by around 5 days compared with end-Oct. PFY companies still need to destock later.

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