PFY companies affected by Huaxiang's announcement to construct new project

The share prices of leading polyester filament yarn companies fell sharply on Jul 2. The reason may be related to the plan of Huaxiang (China) Premium Fiber's new 1.2 million mt/yr PFY project to be launched in Jiujiang. The last time share prices declined drastically due to new production capacity plan was in January this year, when Xinfengming announced to invest 20 billion yuan in new projects which caused market panic and led to sharp decline in PFY companies' share prices.

The announcement shows that Jiujiang Petrochemical Industrial Park is Jiangxi Province's first provincial-level petrochemical industrial park. It strives to build an integrated industrial chain for refining and aromatics, with an annual crude oil processing capacity of 8 million tons. In addition, about 2600 mu (173 hectares) of new areas are planned to be used for aromatics industry chain project, with a total investment of approximately 33.2 billion yuan, and it includes three parts: an aromatics project with an annual output of 1.5 million tons, a PTA project with an annual output of 3 million tons, and a PET project with an annual output of 3.76 million tons. After the completion, Jiujiang Petrochemical Industrial Park will form an integrated industrial chain from refining to aromatics, PTA, PET and end-use products.

Huaxiang Premium Fiber's 1.2 million tons of PFY project is a link in the industrial chain. According to the investigation, the project will be constructed in two phases. The first phase is the relocation of 400,000 tons capacity, which is initially planned to be put into operation in early 2026. It will still depend on the progress of the project. The capacity was originally located in Huzhou, Zhejiang Province, which has been shut down and idled. The second phase of the project is new capacity of 800,000 tons. It is currently under long-term planning and the equipment has not yet been finalized. We expect that the implementation of the second phase of the plan will not be considered until the first phase of the project achieve stable sales, at least until 2028-2029.

Huaxiang's existing 400,000 tons capacity uses equipment imported from Barmag, and has a good quality reputation in the polyester filament yarn market. After the demolition and shutdown at the end of 2022, the company has been looking for a suitable place to develop again. There are several reasons for selecting Jiujiang Petrochemical Industrial Park. Firstly, the Park has integrated upstream polyester raw materials. Sinopec Jiujiang Petrochemical currently has PX capacity and plans to construct 3 million tons of PTA capacity later. However, according to our information, the PTA project is still under investigation. Secondly, Jiujiang is relatively close to Hubei and Anhui Provinces. In recent years, downstream industries in Hubei and Anhui have developed rapidly and thus the products can be digested nearby. Thirdly, Jiujiang Industrial Park is located on the edge of the Yangtze River, with the advantage of waterway for long distances to transport freight to Jiangyi, Taicang and Changshu Wharfs, and then sell through transfer warehouses.

From the perspective of production capacity cycle, Huaxiang's project planning will not change the prosperity of the polyester filament industry in recent years. Even if Huaxiang's first phase of 400,000 tons project is included, China's polyester filament yarn production capacity growth will be only 1.8%, 3.9%, 1.8%, and 1.9% respectively in 2024-2027. The long-term prosperity of polyester filament will not change.