PFY market operation in 2024: high inventory and limitedly recovering profit

In 2024, the capacity increment of polyester filament yarn is relatively small, and the output increases depending on the rise of operating rate.

According to the data from CCFGroup, in 2024, the net increase of domestic polyester filament yarn capacity is estimated to be 1.05 million tons/year (including 1.04 million tons for direct spinning and 10,000 tons for chip spinning) to 52.73 million tons, with a capacity growth rate of 2.0%, which is relatively low. Among this, new PFY capacity is at 1.28 million tons/year in 2024, with growth rate at 2.48%, and 0.23 million tons/year of capacity was eliminated (down 0.45%).

Among this, the new direct-spun PFY capacity is estimated to be 1.22 million tons in 2024 and 180kt/year (Lianda) is eliminated within 2024. Therefore, the net direct-spun PFY capacity is estimated to rise by 1.04 million tons/year to 42.76 million tons/year in 2024, up 2.5%, with apparently shrinking growth rate.

New chip-spun PFY capacity is expected to be 0.06 million tons/year in 2024 and 50kt/year of capacity is eliminated. Thus, the capacity of chip-spun PFY netly increases by 10kt to 9,970kt/year in 2024, up by 0.1%.

Among them, the growth of direct spinning filament capacity mainly includes 300kt/year of Jiatong Energy CP8 Project; 360kt/year of Xinfengming Xintuo CP3 Project; 400kt/year of Rongsheng Shengyuan Phase II Project (500kt/year of polymerization); and 150kt/year of Tongkun Hengchao bicomponent (200kt/year of polymerization).

Throughout the year, the operating rate of PFY and downstream plants was high and the growth rate of supply and demand was both moderate.

In 2024, the average daily operating rate of PFY plants is about 84%, which is higher than 81.6% in 2023. In terms of the year-on-year change of monthly operating rate, the operating rate of PFY plants was higher than the same period of last year throughout 2024, all higher than the 5-year average. Compared with 2023, PFY companies only cut run rate in the third quarter when the inventory was high and the inventory was depreciated with falling price in the whole industrial chain, with run rate lower than the same period of 2023. The annual PFY output is estimated to be around 44 million tons in 2024, with an increase rate of 8%.

In 2024, the overall operating rate of DTY plants and fabric mills is high too and the new capacity increases a lot. The average annual operating rate of DTY plants is around 82% and that of fabric mills is near 69%, which are at the highest level in ten years since 2015.

According to the matching between the operating rate of PFY plants and downstream units, as well as the monthly operating rate benchmarking in 2023, the increment around the Spring Festival from January to February was the most significant, and the total output of the two months increased by about 50% higher than the same period of last year; in addition to the increase of the inventory of PFY factories, the PFY inventory of downstream plants also ascended.

Among them, the inventory of PFY plants was basically the highest in late-March. From April to mid-November, the inventory of PFY basically shivered around high level.

It could be said that PFY companies are bearing the inventory burden which accumulated after the Spring Festival holiday throughout the year. Therefore, the profit of PFY recovers limitedly in 2024.

The yearly cash flow of polyester POY and FDY was at 133yuan/mt and 225yuan/mt respectively in 2024, which was at 67yuan/mt and 246yuan/mt in 2023.

In addition, the cost and price of the industry in 2024 also affects the actual profit and loss of PFY factory, mainly due to the appreciation and depreciation of inventory.

In 2024, under the influence of factors such as world economic trends, geopolitical situation, "OPEC +" production policy and the development of new energy vehicles, crude oil prices was in weak consolidation. The polyester polymerization cost was in range bound in the first half of 2024, greatly fell in the third quarter and was in weak correction in the fourth quarter. As for prices of polyester filament yarn in 2024, it was hemmed into a tight range in the first half of year and was in weak consolidation in the second half.

To more accurately reflect the profitability of the PFY factories, cash flow needs to take into account raw material inventory and the gains and losses from stock. Compared to the nominal cash flow calculated purely based on intraday prices, the simulated cash flow for the first half of the year performed better than the nominal value. However, in the second half of the year, especially in the third quarter, the negative impact on gains and losses was significant, resulting in the simulated cash flow being much weaker than the nominal cash flow.

Calculation method 1: melt cost is calculated based on the average daily spot price of raw materials

Calculation method 2, melt cost is calculated based on average price raw materials in 20 working days, and inventory profit and loss impact is considered.

In terms of the comprehensive performance of PFY in 2024, the increase of new capacity is scarce but the growth rate of production remains as high as around 8%. The direct export of PFY is weak but the overall consumption of PFY sees a growth rate of above 9% by virtue of the increase in DTY and fabric capacity and high operating rate. The growth rate of supply and demand is both good. Constrained by the ongoing high inventory after the Spring Festival holiday, the profit of PFY companies does not recover much in 2024. The raw material market fluctuated little in the first half of 2024 and PFY plants were easier to lock in low-priced feedstock. The value of PFY inventory maintained. However, in the second half of year, the profitability of PFY companies was greatly affected by the raw materials and the depreciation of inventory and met difficulty in locking in raw materials. The actual profit of PFY in the second half of 2024 was worse than that in the first half of year.