Polyester market under divergence with high operating rate but weaker demand

In November, during the season when expectations are weak, the polyester polymerization rate climbs up to a high of the year; at the same time, downstream operation starts weakening. The market shows obvious differences.

High polyester polymerization rate

The lowest polyester polymerization rate appeared near August since the second quarter of 2024. PET bottle chip plants scaled down much production with inventory pressure. Coupled with falling feedstock cost, PFY and PSF producers cut run rate. As a result, the comprehensive polyester polymerization rate reduced to be low.

Feedstock price gradually stopped falling in September and October and the inventory burden has been alleviated. The operating rate of polyester plants moved up. Some units resumed operation recently. The polyester polymerization rate ascended to as high as 93.4% by November 7. Based on current status, not many units will have turnaround in November. Some plants may delay their maintenance. In short run, the polyester polymerization rate is estimated to remain high.

The traditional reason for the high polyester polymerization rate can be understood as that the current inventory is still controllable and the processing spread is moderate.

From the historical comparison of the same period, for POY inventory accumulated at the beginning of year, it was not until the end-September and early-October that it gradually dropped to the level of the same period in previous years. The tempo was slightly different, but the inventory of PSF rose in the third quarter and was now basically flat with the corresponding period of past years.

As for the processing spread, whether it is due to the weak raw materials, high supply and demand expectations and factory strategy adjustments, current processing spread is still relatively considerable.

The situation of PET bottle chip market was slightly different from PFY and PSF sectors. The inventory of PET bottle chip remains high and continues rising. The processing spread is moderate. Not many companies have confirmed their turnaround schedule and some may start turnaround after December.

In addition to subjective speculation, there may be other reasons. For example, integrated companies may need to balance the operating rate on downstream and upstream sector. Some are likely to prepare for the turnaround during the Spring Festival holiday. After all, there is still some time before the Spring Festival. In addition, after a round of big adjustment, current prices have been in the low range of the year.

Weaker downstream demand

Comparing to high polyester polymerization rate, the operating rate of downstream plants under survey reduced this week.

Operating rate of DTY plants kept at 93% in Zhejiang and Jiangsu, above 90% in Xiaoshan, Shaoxing, Cixi, Changxing, Changshu and Taicang.

Operating rate of fabric mills inched down to 81% in Zhejiang and Jiangsu: below 80% for water-jet mills in Wujiang, below 90% in North Jiangsu, above 90% in Changxing; the run rate of warp knitting plants was above 90% in Haining and around 50-60% in Changshu. The run rate of circular knitting plants in Xiaoshan and Shaoxing from Zhejiang was at 70-80% and was at near 60% in Changshu, Jiangsu.

Operating rate of printing and dyeing plants climbed up to 89% in Zhejiang and Jiangsu: at 80-90% in Wujiang, above 90% in Xiaoshan and Shaoxing, around 90% in North Jiangsu, Changxing and Haining and down to 70-80% in Changshu.

However, it must also be admitted that the current market feedback is only an early sign. Compared with the same period in previous years, the current operation rate is still relatively high, and the weakening of demand may still be a gradual process.

Uncertain external environment

Except for industrial factors, the external environment will also exert effects.

Before the election results are announced this week, there was another perspective suggesting that fluctuations in the macro environment in November might present other opportunities for the market. The previously more mainstream view was that if Harris were elected, the existing policy path might continue, leading to a relatively smooth expectation of interest rate cuts by the Federal Reserve. In the context of a weak dollar, this would provide more room for domestic policy adjustments.

However, at present, Trump's victory has further increased uncertainty. On one hand, expectations of a strong dollar have dramatically reversed currency trends, which could affect financial market movements and the effectiveness of related national policies. On the other hand, the export sector is facing challenges; pessimists believe that the pressures on foreign trade exports are greater, while optimists think there may be factors that encourage preemptive exports before a potential window closes. In fact, a greater challenge may lie in the increased risks of uncertainty in both political and financial policies in the future, making market logic even more difficult to predict and subject to repeated adjustments.

Overall, under the current circumstances, downstream demand is beginning to show signs of weakening, but the path of this weakening still carries a degree of uncertainty. Polyester plants are facing gradually accumulating product inventories, but the speed of accumulation also needs to be monitored. Even if some plants already have high inventory, the specific timing for reducing operating rate will depend on the plants' comprehensive considerations and actual plans.

For now, polyester polymerization rate is expected to remain at a high level in November, with attention turning to whether it will accelerate lowering run rate in December. Some plants have begun to express intentions for maintenance in December and January, but more planning will still need to be based on the subsequent demand and inventory levels. Additionally, this must be combined with the plants' strategies and external changes, making it a process with considerable uncertainty.