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Insight | Time: Aug 8 2019 1:24PM
PFY: sound sales hard to continue if demand remains muted
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Sales of polyester filament yarn surged on Wednesday, with average sales ratio at around 170% by P.M.3:00, higher at 450-500% in some plants, but weakened this morning. Reviewing the sales ratio of PFY since late-Jul, there will be an improvement during almost a week.

3 times of improvement have some similarities: 1.Periodical low price, coupled with intensive promotion in big plants. 2. Feedstock inventory of end-users is mainly around 1 week, mainly 5-10 days, after intensive procurement.

Downstream plants did not hoard up too many feedstock, but rigid demand support will sustain. Operating rate of twisting units and fabric mills was in low correction, mainly around 60-70% in Zhejiang and Jiangsu. Operating rate of fabric mills in Fujian and Guangdong was around 40%. Whether run rate of downstream plants will form downtrend or uptrend is still not clear.

As for speculative demand, on one hand, high finished goods stocks of downstream plants further dampened cash flow of fabric mills, and independent twisting units witnessed relatively smaller inventory burden.

Feedstock market is expected to be bearish on additional supply. Some new PX and PTA units are scheduled to start operation in end-Q3 and Q4. Sinochem Hongrun's PX unit have started with run rate at around 70-80%; Sinopec Hainan Refinery is anticipated to have on-spec product in end-Aug; In addition, Fuhaichuang and CNPC Liaoyang's unit is expected to restart in Aug.

For PTA units, Fuhua has lifted the run rate after restart, and Yisheng Ningbo, Liwan and Jialong may restart soon, which is likely to pose pressure on the market.

In short run, whether PFY market will turn better or not still largely depends on downstream demand. If downstream demand improves, operating rate of end-users is anticipated to rise, further supportive to rigid demand for PFY. Stocks of grey fabric will reduce and the supply/demand contradiction of feedstock market is likely to be eased after polyester polymerization rate raised, which is supposed to stimulate speculation. However, if downstream demand fails to turn better and the run rate of downstream plants sustains current level, price of PFY is expected to consolidate at low level, and sales of PFY may improve periodically but lack sound continuity.
[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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