Republican Party in power, what should polyester and downstream companies concern?

November 5, U.S. Eastern Time, is this year's US presidential election day. On the afternoon of November 6, Beijing time, the results have been preliminarily revealed, with the Republican Party taking the lead in winning 270 votes.

Starting from Republican supporters and campaign platforms, let's take a look at what polyester filament yarn and downstream enterprises need to pay attention to in terms of cost and demand.

The Republican Party's supporters are mainly from the heavy asset industries such as real estate, entertainment, oil, mining and manufacturing. Republican supporters are more inclined to protect local industries and oppose excessive foreign competition.

Historically, the energy policies of both parties have remarkable characteristics. The Republican Party supports traditional energy, and some states, such as Texas, have developed oil and gas resources. In addition, oil and gas enterprises are generally the Republican Party's big financiers, providing a large amount of campaign funds for Republican presidential candidates. During Trump's first term in office, he announced that the United States would withdraw from the Paris Agreement on Climate Change. From an energy point of view, the Republican Party will release more traditional energy and push down the production of oil and gas. In the absence of other factors, the Republican administration is a bad signal for energy prices.

Trump, on the other hand, has pursued a foreign policy based on the principle of "America first," including signing trade agreements, demonstrating reluctance to engage in military intervention abroad, and reducing international commitments, including to NATO. On the Israeli-Palestinian conflict in the Middle East, he has shown less enthusiasm for a two-state solution, preferring to impose a quick solution rather than focusing on its feasibility. The retreat of a series of conflicts in the Middle East has helped to further improve energy supply.

Beijing time on November 6 afternoon, crude oil and domestic chemical products prices weakened. PX, PTA futures closed down 2.48%, 2.58% respectively.

The two parties also have obvious differences in their views on the China issue. On the whole, compared with the Democratic Party, the Republican Party mainly focuses on the economic and trade field, while the Democratic Party emphasizes the strategic containment of China through the continuous generalization of the concept of national security and the geographical containment of China. In Trump's campaign platform, he mentioned "China" in terms of "protecting American workers and farmers from unfair trade," and explicitly wanted to abolish China's most-favored-nation status, gradually stop the import of essential goods, and prevent China from buying American real estate and industry, that is, weaken the link with China on the trade side.

In terms of polyester filament exports, the influence of the United States will mainly be in the industrial yarn. In 2023, the total export of polyester industrial yarn was 520.1kt, among which the United States was still the first trading country, with the export volume of 51.4kt, accounting for about 10%. The proportion of other textile filament exported to US was relatively smaller

As for the exports of textiles and apparels, during Trump's previous administration, several rounds of tariffs were imposed, affecting China's proportion in textiles and apparels imports in US. In 2016, the proportion of China was still as high as 49%, and this year but it was only 33% in 2024, which may reduce further later. For domestic textiles, apparels and fabrics manufacturing enterprises, investment transfer outside China is still the main response direction. With the spillover of textile enterprises, upstream DTY producers, fabric mills and PFY companies may be further stimulated to invest abroad. The trend of industrial trade around the world will change to some extent.

In addition, due to the pre-estimate of trade barriers, it will affect the supply and marketing rhythm of downstream market. In short run, as the medium-term trade environment may be not optimistic, the wholesalers and retailers may have the possibility of stocking in advance in US, thus affecting demand expectation on fabric market in China. Like 2018, the direct impact of Sino-US trade friction on the polyester filament chain in 2018 was mainly reflected in the time of end-user demand, which was not weak in off-season and not good in peak season. From January to September 2018, with concerns about the absolute price increase of products in the future and worries from U.S. importers regarding tariffs, some downstream buyers restocked in advance when price was increasing. It resulted into a situation where the off-season was not weak, and overall demand was more robust. However, in the fourth quarter, the traditional peak season, demand was insufficient. Stocking up ahead of time always takes time to digest, which is a further blow to medium-term demand.