Nylon filament demand partly reduces, but with narrow influence

In 2024, nylon textile filament stands out among various textile raw materials. In March, when demand for polyester, cotton, and other fibers appeared weak, nylon textile filament also faced challenges due to a significant drop in raw material prices and average new order transactions. However, unlike polyester, cotton, viscose, and spandex which exhibited signs of fatigue in April and May, with accelerated accumulation in inventory, production cuts, or primarily downward price trends, nylon textile filament experienced a surge in orders starting in April. This surge was accompanied by a gradual widening of the price difference with raw materials, resulting in a general increase in profit per ton by 500-1000yuan/mt, and an increase in operating rates (the decrease in the operating rate in April was mainly due to only a temporary shutdown at a major plant due to power issues).

The significant surge in orders can be attributed to the expanding application scope of nylon driven by the growth of e-commerce, indicating strong demand. Additionally, the significant price drop in March suppressed some purchasing demand, which led to a surge in demand in April as these inventories were depleted.

Moreover, this year's demand performance reflects relatively real market feedback without showing signs of obvious overextension of future demand. At least for nylon textile filament, there is little indication of demand being overextended. Many filament plants are facing a backlog of orders for sought-after specifications, with lead times of up to half a month, causing a supply shortage due to extremely low social inventories (inventory in all sectors and during transportation). This scarcity is partly due to the extreme compression of timelines across various stages of the textile and apparel industry following the rise of clothing e-commerce. The rapid turnover in fashion trends and the accelerated production cycles have rendered traditional production planning ineffective, resulting in increasingly lower inventory safety margins.

As a result, any signs of weakening in orders at weaving and knitting plants quickly impact the procurement pace for nylon textile filament. Starting around May 10, some downstream sectors have shown seasonal signs of reduced orders:

1. Orders at some nylon/spandex air-covered yarn factories have decreased by 20-30% in Jiangsu and Zhejiang, mainly affects conventional DTY, such as semi-dull 70D.

2. Decrease in sunscreen demand in the Chaozhou and Shantou of Guangdong mainly affects dull FDY70D/48F.

3. Seasonal decline in demand for Tencel- imitation and Roman cloth in Shaoxing of Zhejiang mainly impacts semi-dull FDY40D/7F.

Seasonal reason: With a large number of summer products already on the market, some sectors have naturally entered a weak season from the perspective of the weaving and knitting process.

Weather reason: The slow onset of hot weather in many parts in China this year has led to a limited increase in terminal consumption for summer seasonal products, resulting in limited demand for supplemental orders received by weaving plants.

Impact on the nylon textile filament industry: There is minimal short-term impact as filament plants still face tight supply in many specifications or require order scheduling. The operating rates of filament plants have remained high at around 94.5% since March, with industry inventories below 10 days. With such a strong fundamental backdrop, even though some sectors may experience seasonal weakening in demand, it is unlikely to create significant inventory pressure. Furthermore, even if there is a temporary accumulation of inventory, it will be slow given the current extremely low inventory levels and is not expected to affect the operation of filament plants.

However, in sectors experiencing seasonal weakening in demand, corresponding transactions for nylon textile filament specifications are expected to decrease, and the processing fees that were previously raised are likely to gradually return to normal ranges.