PFY downstream buyers: hesitate to restock with the approaching of Spring Festival

At present, some centralized gas supply and sewage treatment plants in Jiangsu and Zhejiang announced to start Spring Festival holiday intensively from the end of January to early February. Theoretically, the production time of printing and dyeing factories and water-jet mills can be maintained. However, as some non-local textile workers returned hometown for holiday intensively near mid-Jan, the operating rate of DTY plants, fabric mills and printing and dyeing plants sped up to fall this week. 

Operating rate of DTY plants dropped to 71% in Zhejiang and Jiangsu: at 60-70% in Changshu, above 60% in Taicang, above 80% in Xiaoshan and Shaoxing, near 60-70% in Cixi, and above 80% in Changxing.  Operating rate of fabric mills declined to 60% in Zhejiang and Jiangsu: around 80-90% for water-jet mills in Wujiang, above 80% in Changxing, below 70% in North Jiangsu; the run rate of warp knitting plants was around 60-70% in Haining and around 30-40% in Changshu; the operating rate of circular knitting plants was near 20-30% in Xiaoshan and Shaoxing and plants in Changshu basically suspended production. Operating rate of dyeing plants declined to 67% in Zhejiang and Jiangsu: above 70% in Wujiang, around 90% in North Jiangsu, around 70% in Xiaoshan and Shaoxing, at 70-80% in Changxing and around 50% in Haining. Plants in Changshu almost have started holiday. Some workers will intensively shut down for holiday on Jan 20, Jan 25 and end-Jan and the run rate of downstream plants will intensively descend by that time.

In terms of printing and dyeing factories, the dyeing factories are currently on holiday in Changshu. Plants in other regions plan to gradually go on holiday from around January 20 to the end of January, with some dyeing factories even scheduling their holidays until February 8. This is related to the workers and orders of each factory, so the relatively busy factories will go on holiday a few days later. However, considering the workers' situation, even the factories that go on holiday in February will stop receiving grey fabrics around January 25-26.

As for fabric manufacturing sector, based on survey made by CCFGroup, it is estimated that the operating rate of fabric mills in Zhejiang and Jiangsu will decrease to less than 30% around January 25 to the end of January. Historically, downstream factories going on holiday around 15 days before the Spring Festival is normal because this is the normal time for non-local workers to return home. However, in 2023, the Spring Festival holiday started early, with factories going on holiday one month in advance, which makes it seem like the holiday is later this year.

Currently, some DTY plants and fabric mills have already gone on holiday and entered a period of concentrated collection of payments, while others are still finishing production. For raw materials for production before the Spring Festival, the inventory is relatively sufficient, mainly able to guarantee production for 1-2 weeks. However, for raw materials purchased for production after the Spring Festival, most adopt sidelined attitude now.

The final decision for downstream speculative purchases mainly depends on the expectation of appreciation or depreciation of inventory. Based on the current market performance, both crude oil and polymerization costs are in a range-bound state, lacking factors that lead to significant price fluctuations. It is understandable for downstream companies to be cautious in stockpiling.

Looking at the prices of PFY factories after the Spring Festival in the past years, 2019 and 2021 saw good profits from pre-holiday stockpiling, while other years' speculative stockpiling resulted in losses. On the other hand, the inventory of PFY factories tends to climb after the Spring Festival.

Based on the current prices of raw materials and finished products, many DTY plants and fabric mills do not have profits or even suffer losses. Moreover, orders after the Spring Festival seems to be lacking now. Therefore, downstream players are still waiting for further discounts from polyester companies before entering the market.