Polyester market back to trough period again in 2022

In 2022, the macro-environment is complex and changeable. In the first half of the year, the energy price rose sharply under the outbreak of Russia-Ukraine conflict, resulting in the continuous fermentation of overseas inflation problems. In the second half of the year, under the aggressive interest rate increase policy of the Federal Reserve, the economic recession expectation continued to heat up, which made the bulk commodities under downward pressure. In addition, the domestic real estate market continued to be depressed, while under the epidemic control measures in various regions, the end-user demand environment deteriorated significantly. 

Polyester market saw sharply falling sentiment in 2022. The market fundamentals apparently changed. Above 5 million tons of new units started operation and the growth rate of capacity kept rising compared with 2021. However, the polyester production saw negative growth in 2022. In addition, polyester companies witnessed substantially decreasing profit with high cost and low demand. The operating rate and inventory of polyester enterprises gradually worsened.

Polyester market faced obviously worse operation environment in 2022. End-user demand remained bleak pressed down inflation outside China and the spread of pandemic in local China. Price of polyester products curved a "V"-shape trend throughout 2022. In the first half of year, price of polyester products moved up in line with the cost side when energy price was in upward correction amid the Russia-Ukraine conflict and hit yearly high in early-June. However, in the second half of year, price of commodities was pressed down after the interest rate of USD dollar was raised. Coupled with ongoing soft demand, price of polyester products slumped and hit yearly low.

Capacity sustained high increment but production saw rare negative growth.

In 2022, new polyester capacity was at 5075kt/year in China. 600kt/year of old units resumed operation. The growth rate of capacity was at 8.7% but it was revised down to 7.3% after some old units were eliminated. Polyester capacity still edged up and is expected to be above 70 million tons/year by the end of 2022. As for production, with inflation outside China and the regulation of pandemic spread in China, export and domestic demand for polyester sustained in doldrums. The polyester output was expected to be only at 57.30 million tons in 2022, down by 1.1% on the year, the first negative increase in recent decade.

The market fundamentals apparently changed in 2022. Above 5 million tons of new units started operation and the growth rate of capacity kept rising compared with 2021. However, the polyester production saw negative growth in 2022. In addition, polyester companies witnessed substantially decreasing profit with high cost and low demand. The operating rate and inventory of polyester enterprises gradually worsened.

The operating rate sharply declined, apparently lower than the same period of past years.

In 2022, the operating rate of polyester plants was high at first but declined later. In the first quarter, the polyester polymerization rate gradually increased when the crude oil and petrochemical cost was expected to ascend, hitting yearly high at 95% in mid-March. However, with weaker external environment and the spread of pandemic in some regions of China, coupled with deteriorating end-user demand, the polyester companies encountered the pressure from cost and profit, with run rate rapidly down to 80% in the second half of April, The polyester polymerization rate sustained at 75-85% for long in the second half of 2022, with yearly average at around 84% in 2022, down by 6 percentage points on the year.

Inventory obviously increased and the pressure in fiber filed was more prominent.

End-user demand remained weak in 2022. On one hand, players worried the global economy to recede when the Fed raised the interest rate aggressively. On the other hand, with worse spread of pandemic in some regions of China, the regulation measures kept intensified. Polyester market encountered bad domestic and external environment. Inventory piled up greatly, especially in fiber field. The inventory of PFY was at 27-31 days in 2022, up by 5-13 days over 2021, and that of PSF averaged at 11 days, up by 8-9 days on annual basis.

Profit dropped: PET bottle chip and PFY markets were seriously diversified.

Energy price surged in 2022 impacted by the Russia-Ukraine conflict. As a result, the petrochemical cost sustained high. The price of WTI crude oil was at $96/bbl in 2022, up by $28/bbl year on year. The average price of PX was at $1119/mt, up $259 over 2021. The processing fee of polyester sector narrowed amid high cost and weak demand, especially fibers. The profit of PFY and PSF apparently dropped in 2022 year on year. POY and FDY plants saw apparent losses. However, the non-fiber sector performed moderately. The processing fee of PET bottle chip doubled in 2022 compared with 2021.