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Insight | Time: Aug 24 2020 1:18PM
Polyester: cautious about later peak-season end-user demand despite recent recovery
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Downstream demand has recovered on the month since late-Jul, but diversified performances are seen. Orders for fabric for home textiles apparently improve. Warp knitting plants in Haining and Changshu and water-jet units in Changxing, which are major representative production bases for fabric for home textiles, witness better orders, with run rate up to near 80-90%. However, the improvement of fabric for apparel and boxes and bags are weaker. Operating rate of apparel fabric bases representative by water-jet units in Wujiang and circular knitting plants in Xiaoshan and Shaoxing is low. The run rate hits yearly low in Wujiang, near 50%, as many companies cut run rate amid poor sales and higher stocks of grey fabric and losses.

Why is business for fabric for home textiles better than that for apparel and bags and boxes?

1. The organization structure and feedstock of fabric for home textiles is simple, relatively more available for stockpile.

2. Finished home textiles are out of stocks in large supermarkets or shopping mall abroad since the outbreak of COVID-19 worldwide. They need to restock, driving home textile export in China.

3. Strong real estate in China also supports demand for home textiles.

4. Many people worked at home and reduced social contact in the first half of 2020 due to the pandemic, propelling demand for home textile but dragging down demand for apparels.

In Jul, the retail sales of garments, footwear, hats and knitwear scored at 88.9 billion Yuan, down 2.5% year on year. Retail sales of apparel and accessories industry only rose by around 5.7% in Jul after surged 105% on the month in Jun, down by 20.9% on the year, which implied substantially slower recovery momentum. The worst time has passed in terms of demand. Demand is gradually recovering now but the restore is not smooth, likely to resurrect slowly and weakly.

As for the tendency of end-user demand, the continuity of orders for home textiles should be firstly concerned. Orders for home textile started improving from late-May in some plants and later from late-Jul in some companies. Current orders for home textile can guarantee production until end-Aug or mid-Sep, but new orders seem to have feeble durability. Orders for fabric for apparels, boxes and bags keep improving recently, but the improvement is expected to be limited later due to the high stocks of finished goods in apparel companies and the COVID-19 pandemic. Offline apparel consumption and order placement of apparel enterprises are anticipated to be cautious. Generally speaking, demand is still growing, but not much expectation is held toward the durability and strength during the traditional peak season (Sep-Oct) as partial demand for home textiles has been put forward and the later demand for apparels may be constrained.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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