Polyester downstream demand: critical point has been reached

The operating rate and orders of downstream plants have both improved limitedly since September, which is mainly due to the following reasons: 1. Many end-user customers delay placing orders or only place orders by batches amid falling feedstock prices. Some customers require to fix the price for orders taken previously, which impairs the profit of fabric mills. 2. It is related to the weather. The temperature is high in September, disfavoring the sales of autumn apparels and further dragging down the placement of orders in autumn and winter. 3. It is because market players lack enough confidence. The replenishment for autumn and winter is shrinking as a result. As downstream business improves weakly, the inventory of grey fabrics still fails to fall. Coupled with continuously reducing feedstock price, price of grey fabrics also traces the downtrend. Fabric mills witness big pressure in depreciated inventory.

By convention, the inventory is supposed to accumulate in the first half of year on downstream sector as sellers hope to make money by consuming the inventory in September and October. The money they make in two months can be even worth the whole year. However, the situation is different this year. The peak season has not come and the inventory has been greatly depreciated. Many players reflected that the business had been very busy at the same time of last year and the grey fabrics in the warehouse have been mostly sold, while the market remains quiet this year by now. If the performance in peak season is worse than anticipated, some may even undersell and the inventory will be depreciated further. Currently, downstream players hope demand to improve to lower inventory at hand.

The consumption of polyester in the second half of year focuses on autumn and winter products in recent years. By convention, polyester will see demand peak from September 20 to late-October. This critical point has been reached now. Demand for autumn and winter fabrics grows after the weather cools down. Whether it will stimulate the orders for autumn and winter should be noted.

From a seasonal perspective, there is not much time left for improvement in polyester downstream demand. End-September and early-October will be a crucial point to check the performance of peak season. Based on current market sentiment, the performance of peak season may be hard to exceed expectation, more likely to be an improvement over last month. If the inventory of downstream market can be consumed before end-October, rigid demand for polyester filament yarn is likely to be supported in November and December. Otherwise, the production curtailment of downstream plants ahead of schedule before the Spring Festival should be alert to.