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Insight | Time: Nov 4 2020 10:41AM
Different development of nylon 6 DTY and FDY
 
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In October, it is the second time in the year of 2020 when nylon filament factories have intensively reduced their inventory burden. The last time happened in April when the demand for mask ear straps broke out. But there is a fundamental difference between the two waves of price increase and destock.

When the demand for mask ear straps burst out in April, the demand for DTY coarse denier yarns surged, which incidentally benefited its upstream product POY. However, the traditional demand areas did recover in April 2020 due to the severe pandemic situation around the world. So that other markets such as FDY and HOY were almost stagnated. In October, the market has been mainly driven up by actual demand along with external news. The transaction situation of various products has improved, but the market preference is different, and the degree of increase in price and sales also varies.

The April and October market also have something in common, as the demand is all related to DTY. It’s just that in April, the mask ear straps drove the surge in demand for 70D/24F double-strands, and even the 40D-70D DTY was sold out in the short term. The hot sales in October focus on porous DTY 20-40D used in the weft knitting market (such as 30D/36F, 40D/36F, etc.), which are mainly used in the field of yoga clothes. The corresponding product stock of NFY factory are also cleared, even oversold. Although the demand for FDY for feather yarns is good in October, the overall situation of FDY has been completely different compared to previous years.

In historical trends, FDY market had a time of more advantages.


In the significant rebound after the deep fall market in May 2017, the demand for feather yarns surged for the first time in China. Both FDY flat filament and conventional DTY were the main raw materials of feather yarns. But due to the shortage of FDY equipment and a short period of technical barriers, FDY supply was even tighter than DTY, and thus the price of FDY was more resilient. Even the most conventional FDTY 70D could gain at least 1,000yuan/mt more than DTY. In the peak season of feather yarn production in 2017-2018, from May to September, the performance of FDY was much "superior" compared to DTY.

However, explosive products also stimulated new production capacity. The feather yarn market rapidly expanded afterward, and became in surplus in the second half of 2018, so that the price and the profit were rapidly compressed. By 2019, feather yarn again deteriorated to a conventional product with mediocre benefits and mediocre demand, the price difference between FDY and DTY returned to a relatively stable level. But this relative stability has been reversed with the global COVID-19 pandemic in 2020.

DTY booms in 2020, FDY loses advantages
In April 2020, due to the need for COVID-19 prevention, the demand for masks gushed out in. The DTY products applied for mask ear straps jumped 3,000-6,000yuan/mt in just one week, and then quickly fell back. Because DTY for mask ear straps accounted for a small proportion of the nylon fiber market, as the popularity of masks fell, DTY- FDY price spread also returned to normal range fluctuations again. In addition, as residents of many countries stay at home for a long time during the pandemic, they prefer yoga clothes and sportswear that are more comfortable and easy to exercise. This has driven the strong growth in demand for fine-denier porous DTY from August to October, when porous DTY supply has become tight.

In October 2020, nylon FDY market ushered another "peak season" with feather yarn sales boomed in the month. Nevertheless, the popularity of feather yarn only started in late September 2020, evidently later than previous years. Even if it is currently foreseeable that production demand will continue to November, the market capacity is no longer as large as in previous years, and downstream is cautiously building inventory. Therefore, FDY supply is not tight, and price increases are not strong. In 2020, the performance of DTY market is still remarkable, and FDY is no longer superior.

FDY and DTY profit trends are similar


Although FDY and DTY have been performing differently in recent years, the general trends of the profits of the two products are still similar.

From 2017 to June 2018, demand growth for both products kept strong, and their profit margin continued to improve. From July 2018 to February 2020, as the feather yarn heat dissipated and the impact of Sino-US trade frictions affected the export of nylon textiles, both DTY and FDY prices fell, and the profit margin continued to be compressed.

Starting from March 2020, the profit margin of nylon products had waved evidently due to the periodic demand. But as feedstock market also rose significantly, and the profit of fibers was still relatively low in general. Even in October, when the demand unexpectedly improved, nylon FDY and DTY profits did not fundamentally improve.

There are news of overseas orders were switching to China market, and that the order taken by fabric mills have been arranged till May 2021. However, there are also worries that there will be another round of break out of the pandemic. As it affects the production, it also damages demand, at least some part. So it is necessary to maintain rational anticipation during the fluctuations.
[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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