Polyester: production curtailment expected to be postponed

Recently, many market players had some questions in mind: How can the polyester polymerization rate sustain high amid poor demand? The inventory of polyester products does not accumulate. Where do the cargos go?

It is two questions here: why can polyester polymerization rate sustain high and how is the production consumed amid such high operating rate?

High polyester polymerization rate is mainly stimulated by PFY and PSF sectors. High operating rate of PET bottle chip plants also makes some contribution.

The following part will analyze how polyester production is consumed under such high operating rate.

The polyester polymerization rate kept increasing since May and was stabilized at around 93% in Jun. The operating rate of direct-spun PFY producers was as high as 87.5%, that of PSF plants was at 82.1%, and that of PET bottle chip producers shivered around 100% or above.

How about the inventory of polyester products during this period? Stocks of polyester factories did not rise but fell amid high operating rate. PFY and PSF producers still did not face inventory burden since Jun, with inventory of POY+FDY and PSF mainly around 14 days and 9 days respectively, slanting low. Compared with early-May, the inventory of POY+FDY and PSF has been reduced by near 5 days.

The social inventory of PFY slightly increased, mainly because downstream plants increased restocking PFY. The PFY stocks of downstream plants rose by near 7 days over early-May, and the PSF inventory of downstream spinners advanced by around 3.5 days. The major pressure was mainly because the stocks of grey fabrics and polyester spun yarn advanced.

In addition, exports of polyester fiber were good. PFY exports were at 361.7kt in May, hitting yearly high and up by 7.82% m-o-m and 21.46% y-o-y respectively. Exports of uncarded PSF were at 98kt in May, up 8.8% on annual basis and down 7.4% on monthly basis. Exports will still play active role in consuming polyester products in Jun.

High output of polyester fiber amid high operating rate in May-Jun was digested by periodically good export and increasing downstream replenishment. Polyester sector did not see mounting inventory burden.

Meanwhile, the polyester feedstock price is not expected to fluctuate greatly in short run. Polyester products are still estimated to be profitable. Therefore, the operating rate of polyester fiber plants is still anticipated to remain high in short run. Polyester plants were earlier expected to cut run rate due to the inventory burden in the second half of Jun, while such expectation fails.

The contradiction on later polyester market mainly relies on the following two points: firstly, fabric production will be during off-season in Jul-Aug, while PFY and PSF plants still run at high capacity. The inventory burden of polyester market is likely to be intensified. Secondly, many new PET bottle chip plants will start operation intensively while downstream market will not consume rapidly. PET bottle chip plants may encounter increasing inventory burden after the peak season ended. The inventory pressure is anticipated to be escalating in Jul-Aug on polyester market, and the probability of time moving forward is greater. The above estimate is based on the expectation that there will not be significant fluctuations in polymerization cost. If the cost side greatly fluctuates, the reduction pace of polyester polymerization rate may change.