Polyester filament after May Day holiday: diving cost but ongoing soft demand

On April 30, some PFY plants discounted price for promotion. Sporadic downstream buyers intensively purchased attracted by the low price, while some adopted looking-on mindset. As a result, after the May Day holiday (from Apr 29 to May 3), some downstream customers were very glad while some felt sad.

During the holiday, crude oil price fell continuously on May 1-3, with WTI falling 10.65% from US$76.78/barrel to US$68.6/barrel, close to the previous low value of US$66.74/barrel in mid-Mar. As for the main reason, it was mainly due to the weak expectations of investors triggered by some overseas data. Before and after the holiday, the main overseas news were: the growth rate of GDP in the United States was lower than market expectations in the first quarter of 2023, indicating that the pressure of recession in the United States has increased; some banking problems in the United States have once again aroused widespread concern in the market.

In addition, the price of PX, CFR China, fell by $56/mt to $1011/mt on May 4 from $1067/mt on Apr 28.  PTA market saw collapsing cost and increasing supply. The news of unit operation change during and after the holiday included: Jiatong Energy Phase II new PTA unit with 2500kt/year of capacity started operation successfully and superior product has been available; OPSC's 750kt/year PTA unit restarted production during the holiday; FCFC Taiwan's 700kt/year PTA plant resumed operation from Apr 28. OPTC's 500kt/year PTA plant shut down for turnaround from Apr 30, which is expected to last for one month; FCFC Taiwan's 550kt/year PTA unit plans to suspend production for maintenance in the first half of May. The above $400/mt of PX-naphtha spread and above 670yuan/mt of PTA-PX spread face risk to fall from high level in short run. Relatively speaking, the low price of MEG is likely to enjoy support when the inventory is descending. In general, the polymerization cost is mainly affected by PX-PTA chain. The pressure comes from the cost and supply sides, as well as the reduction of polyester polymerization rate in May.

During the May Day holiday, some DTY plants, fabric mills and fabric mills shut down for holiday in Zhejiang and Jiangsu, with run rate down to around 60%, 43% and 64% respectively. After holiday, to consume the PFY prepared before and due to the labor issue, the run rate of DTY plants, fabric mills and fabric mills recovered to 69%, 64% and 71% respectively in Zhejiang and Jiangsu. The run rate has been slightly higher than the pre-holiday level now but the increment was limited, mainly dragged down by weak orders and mounting inventory. As for different fabric manufacturing bases, the recovery of warp knitting plants in Haining was bigger, while that of other markets was modest.

As May-Jun are supposed to be traditional off-season, the operating rate of DTY plants and fabric mills may be not too high. Considering the high speed of capacity expansion and low growth rate of actual demand, the operating rate of this May is likely to sustain low compared with the same period in history.

The operating rate of direct-spun PFY plants declined to around 78% after the May Day holiday. The PFY stocks of downstream plants could mainly guarantee production for around 5-10 days, longer for around one month. If there is no speculation in expectation of rising price and the operating rate of downstream plants does not increase substantially, the consumption of PFY is still expected to be under pressure. The stocks of PFY may accumulate. For some factories with high inventory, they may intend to cut production further. The operating rate of direct-spun PFY plants may be lower than 75%.

The price of PFY is expected to be fragile in line with the cost side in short run when the feedstock cost and demand is both weak and most plants are suffering losses.