China's PFY exports bound to descend in Q4 2023

PFY exports totaled 369kt in Sep 2023, down by 0.4% on the month. Among this, exports to India were at 82kt, higher over Aug. The total PFY exports amounted to 3107kt in Jan-Sep, 2023, a year-on-year increase of 28.8% or 695kt, and India contribute to 42.5% of increment.

The PFY exports of Sep was greatly different from earlier estimate. On one hand, the procurement from India was underestimated. The total PFY exports to India were above 160kt in Aug-Sep. On the other hand, customs statistics count the time of exported goods based on the clearance date, so there may be a phenomenon of cross-month statistics. If a factory ships goods around the end of Aug, they may be counted in Sep. This phenomenon can create greater disruption, especially when there is concentrated shipping of orders.

As for Q4, the BIS certification policy has been started in India reflected by Indian customers, while mainstream PFY enterprises in China do not obtain the certification for the time being. Orders from India were scarce in Oct reflected by some factories, and the PFY inventory in Indian customers can at least guarantee production until Feb-Mar, 2024. Therefore, PFY exports bound to apparently decrease in Q4 2023, which may be lower than 300kt in Oct and above 300kt in Nov-Dec supported by replenishment in the end of year. The total PFY exports are estimated to be around 4 million tons throughout 2023, up 21% year on year.

Monthly POY exports exceeded 100kt in Sep for the first time in history, and exports to India were at 48kt, taking up around 50%. POY exports increased by 368kt on annual basis in Jan-Sep, 2023 and India contributed to 49.2% of growth. Exports of FDY rose by 174kt on the year and India accounted for 57.4% of increase.

The payment improved in Sep in Egypt. Exports of PFY to Egypt rose by 26.1% on the month. The freight to Egypt even once surged to US$1700/40HQ. According to data from the Central Bank of Egypt, Egypt's Net International Reserves (NIR) reached $34.97 billion in Sep, an increase of $42 million from the previous month, marking the highest level in 16 months.

In addition, although there have been rumors in the market that India has implemented BIS certification for polyester filament yarn, domestic major factories have not received any clear notification yet. In the short term, export trade may temporarily stagnate if Indian customers have sufficient raw materials. However, there are still opportunities in the medium term. There may be some room for artificial manipulation, similar to India's anti-dumping measures on polyester filament yarn, to meet domestic demand in India.

As for the container marine market, the freight rate of mainstream routes was firm in Oct as shipping companies continued cutting shipping capacity and that of some routes retreated from high level. The freight from Ningbo to Pakistan/Karachi advanced to US$1250/40HQ from US$1000/40HQ in early-Oct, that to Egypt/SOK rose to US$1850/40HQ from US$1300/40HQ in early-Oct, and that to Indonesia/Jakarta fell to US$450-600/40HQ from US$750/40HQ. Due to the flood, the delivery to Brazil has been suspended temporarily. At present, the main contradiction of the shipping market still lies in the lack of obvious increase in demand, so shipping companies can only take the initiative to continuously reduce the transport capacity to maintain the freight rate.