PFY and downstream sectors: weak peak season sentiment despite high operating rate

October is nearing its end, but so far, players on polyester and downstream markets remain largely dissatisfied with the performance in September and October this year.

The operating rate is high in September and October.

The average operating rater of direct-spun PFY plants was high as 90.5% and 93% respectively in September and October, both higher than the peak in previous five years.

The operating rate of downstream plants was high too. The cost decreased in September and the actual sales of grey fabrics were modest, while the run rate of DTY plants, fabric mills and printing and dyeing plants increased to 90.35%, 75.9% and 80.9% respectively to prepare for the coming traditional peak season. In end-September and early-October, stimulated by macro market and regionally better sales of some seasonal fabric, the operating rate of downstream sectors ascended further, which sustained high since Oct. The average operating rate of DTY plants, fabric mills and printing and dyeing units is estimated to be near 93%, 82% and 85.5% respectively in October.

However, sales and profit was disappointing in October.

After increased in end-September, PFY sales were largely weak in October, which only improved slightly on October 18. The inventory of polyester POY and FDY piled up to around 19 days and 20 days from 12 days and 13 days in end-September.

Sales of grey fabrics were diversified. The inventory of grey fabrics was under downtrend, which has fallen to around 25 days now, lower than the same period of 2022 but still higher than the corresponding period of 2023. Destocking varieties focused on warp-knitted fabrics in Haining and circular-knitted fabrics in Haining, Xiaoshan, Shaoxing and Changshu. The stocks of warp-knitted fabrics and other water-jet fabrics decreased not well in Changshu. Sales of thin fabrics for autumn and winter fabrics were relatively better.

Moreover, the price volatility and average prices in the second half of this year have been lower than in the first half. Particularly, stocks of grey fabrics fell in September and October while most faced a high possibility of substantial losses. As a result, many fabric mills run at high capacity and see falling inventory, but they have a poor feeling for the peak season.

From the perspective of short-term sales rhythms on downstream sector, the demand for long plush and high-density polyester pongee needed for deep winter has not yet fully started. In terms of weather patterns, it may replicate last year's trend, with inventory reduction likely concentrated in mid to late November. Therefore, the operating rate of DTY plants and fabric mills may still maintain highin November, providing essential support for rigid demand for PFY. In terms of risks, attention should be paid to factors such as geopolitical events and the U.S. elections in November, which could impact oil prices and subsequently affect the pricing of the polyester and downstream industrial chain.