Polyester: increasing downstream factories call for production curtailment

Since November, the weakening of downstream terminal has become increasingly evident. Sales weaken in fabric mills and DTY plants and the inventory accumulates again. According to the downstream order index from CCFGroup, the current business situation has noticeably declined compared to mid-October. Last year, as the weather turned colder, there was a significant rebound in domestic sales; however, this year, despite the gradual cooling of the weather, recent feedback from downstream indicates little activity. It seems unlikely that this year will replicate last year's end-of-year rebound, or perhaps just need to wait a bit longer.

Due to the ongoing weakness in downstream business, calls for production cuts among downstream factories have been increasing. The followings are the basic status in major fabric manufacturing bases in China:

In Wujiang, some downstream feedback indicates that production companies for water-jet fabric in Wujiang and other locations have begun to shut down and take holidays due to losses and inventory pressure, with the number of companies taking breaks continuing to rise

In Changshu, local warp knitting enterprises focusing on domestic sales are still under significant inventory pressure. As business gradually weakens, the operating rate has started to decline, and some companies report that shutdowns in early-December will become noticeably more frequent. Similarly, sales from DTY companies in Taicang and Changshu have also slowed significantly. Recent business for dyeing and finishing enterprises in Changshu has also been slacker, with some dyeing workshops operating intermittently.

In Shaoxing, the business of terry velvet products, which are mainly winter items, has been clearly weaker compared to earlier periods, with varying degrees of operation rate decline. The operating rate was previously as high as around 90% and has fallen to 50-60% now.

In Haining, the operating rate of warp knitting mills is high, but business has weakened too. Most warp knitting companies are in a phase of accumulating inventory, with some hoping for a recovery in orders as the weather cools further.

In Changxing, the run rate of water-jet mills is also at a high level, but business has noticeably thinner since the Double Eleven online shopping festival, leading to a renewed accumulation of grey fabric inventory. Some companies report that due to low raw material prices, maintaining some inventory poses little risk.

Overall, the clear weakening of downstream business has become a common issue across various fabric manufacturing bases, with the speed of operation rate decline depending on local inventory situations. Companies experiencing production cuts include water-jet mills in Wujiang and surrounding, warp knitting plants in Changshu and circular knitting factories in Shaoxing. Additionally, domestic demand this year is relatively weak, and it remains uncertain whether downstream business will rebound like last year or how strong that rebound might be after the weather turns cold. If sufficient support for downstream demand is not achieved before the end of the month, the speed of production cuts in December will likely accelerate, further dragging down the rigid demand for upstream polyester sector.

Regarding potential export surges following Trump's presidency, recent research with some foreign trade companies exporting to the U.S. indicates that while some enterprises are experiencing a rush to export certain products, most companies do not yet feel this urgency and will require further observation in the future.