Polyester filament plants have promotions, cost and supply&demand under pressure

Price of PFY declined recently, which reduced by near 50-150yuan/mt on March 10. The trading price of POY150D/48F was at 7000-7050yuan/mt, lower than 7050-7150yuan/mt before the Spring Festival in early-January.

However, sales of PFY presented modest, with sales ratio at 300% on March 10, at 700-750% in some plants and near 300-400% in mainstream large companies.

Recent decline in PFY prices is mainly due to the lagging follow-up to the previous cost reduction. From mid-February to March 10, with falling oil price, price of PX, PTA and MEG all traced the downtrend. The price of PX CFR China fell to $831/mt from $896/mt, that of PTA decreased to 4825yuan/mt from 5110yuan/mt and that of MEG descended to 4544yuan/mt from 4757yuan/mt. The polyester polymerization cost reduced by 314yuan/mt to 5634yuan/mt from 5948yuan/mt.

When the cost was under downtrend, the prices of PFY were firm. By last Friday, the trading price of POY150D only fell by 150yuan/mt over February 10. During this period, the nominal cash flow and processing spread of PFY significantly widened. By last Friday, the processing spread of semi-dull POY and FDY150D enlarged to 1533yuan/mt and 1823yuan/mt respectively. After price dropped on March 10, the cash flow was squeezed to 1396yuan/mt and 1756yuan/mt respectively, still profitable.

The supply and demand of PFY was also dragged down when the price was reducing. PFY companies were fast in restarting after the Spring Festival holiday. The operating rate of direct-spun PFY plants was above 90% in the second half of February and stayed 92.9% now, higher than the corresponding period of last year. However, the operating rate of DTY plants, fabric mills and printing and dyeing plants was mild, lower than the same period of 2024, which was at 84%, 74% and 79% now. Domestic rigid demand for PFY was slow with weak operating rate.

At the same time, the domestic and export orders in the fabric manufacturing sector have remained weak. The main reasons included: on one hand, substantial impacts from export "tariff barriers" and "small parcels," leading to significant uncertainty in costs, which prompted overseas buyers to shift their procurement channels, while domestic customers were hesitant to accept orders; on the other hand, some inventory was built up domestically before the Spring Festival, and after the festival, with operating costs remaining weak, the placement of orders has become cautious as players waited. This situation also relied on the reality of accelerated production schedules and efficiency in domestic textile and clothing manufacturing. During this period, DTY plants and fabric mills digested the stockpiles made before the Spring Festival while lacking the enthusiasm for speculative procurement.

The inventory of PFY accumulated, with that of POY, FDY and DTY in large companies up by 12.1 days, 9.4 days and 7.7 days respectively over levels before the Spring Festival holiday. Current inventory of PFY has been close to that in the same period of last year and that of FDY and DTY was high, especially fine denier FDY with inventory burden and being unprofitable.

Currently, the short-term crude oil market is digesting the bearish impact of OPEC+'s increased production. OPEC+ plans to implement a daily production increase of 138,000 barrels starting in April, distorting the balance sheet for Q2. At the same time, concerns about demand have arisen due to increased tariffs. In the future, attention will be focused on the developments of the Russia-Ukraine war and the progress and changes in tariffs imposed by the U.S. The overall destocking pattern for PTA may remain unchanged in March, but high inventories continue to suppress the recovery of processing margins, with absolute prices primarily following the trends of crude oil and PX. For MEG, the overall supply-demand balance is expected to be stable in March, but the difficulty in reducing actual inventories, combined with falling costs from coal-based production, leads to weak fluctuations in absolute prices. In the short term, whether the previous low price support for crude oil will be broken should be concerned, while the melting feedstock cost is anticipated to shiver near bottom.

As for the demand side, polyester polymerization rate is still on a recovery trend; however, the main pressure currently comes from sluggish orders for textile and apparel, which significantly negatively affect market sentiment. The performance of PFY during the "Golden March" remains unclear, as it is primarily characterized by tepid and weak operations, which may be weak compared with the same period of last year as the impact of exports may exceed anticipation. Under the backdrop of weak demand and cost expectations, DTY plants and fabric mills are inactive in building up inventory compared with previous years and the performance of "Golden March and Silver April", traditional demand peak season on downstream market, may be not strong. The inventory of PFY is supposed to keep accumulating under high operating rate. Factories try their best to control the reduction speed of prices but the absolute price of PFY may be hard to curve an independent market trend.