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Insight | Time: Oct 8 2019 9:42AM
Operation status of polyester market during Oct 1-7
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1. Overseas market
The Saudi state-owned oil company, the head of the trade department of Aramco, said on Monday (September 30) that the company had restored its production capacity to the level before the oil facility was attacked on September 14. The Ecuadorian Ministry of Energy announced on October 1 that it will withdraw from OPEC on January 1, 2020. With intensified global trade friction, players' worry on economic recession and falling demand escalated. Statistics showed that the Sep ISM manufacturing PMI in US was at 47.8, far lower than the earlier anticipation and last data 49.1, hitting 10-year low. According to data released by the US Energy Information Administration (EIA) on Wednesday, US commercial crude oil inventories increased by 3.104 million barrels in the week ended September 27, which was higher than market expectations and recorded an increase for the third consecutive week.

Price of oil and petrochemical products
  Market Unit 27-Sep 4-Oct Change
Crude oil futures WTI $/bbl 55.91 52.81 -3.1
Brent $/bbl 61.91 58.37 -3.54
Naphtha CFR Japan $/mt 513 489 -24
MX FOB South Korea $/mt 696 684 -12
PX CFR Taiwan $/mt 799 789 -10
Pure benzene FOB South Korea $/mt 712 671 -41
Toluene FOB South Korea $/mt 672 666 -6
Styrene FOB South Korea $/mt 978 962 -16
Ethylene CFR Northeast Asia $/mt 850 810 -40
Propylene FOB South Korea $/mt 915 910 -5

Impacted by restoring production in Saudi Arabia, the future withdrawal of Ecuador and decreasing expectation of global economy and demand, price of crude oil kept declining, and that of different petrochemical products also moved down.

2. Polyester market operation status during Oct 1-7
Price of polyester filament yarn was discounted on Sep 24 and 29, and sales improved, but price of PFY was largely stable during the holiday and sales were bleak. Sales ratio was around 0-10% on Oct 1-4, around 20-30% on Oct 5-6 and rose to around 30-40% on Oct 7. Therefore, the average sales ratio during the 7-day National Day holiday was around 20%, and stocks accumulated by 5 days deducting the goods not being delivered to customers. However, actual delivery was moderate driven by sales before holiday although new orders were scarce. Actual stocks of PFY largely increased by more than 3 days.

By Oct 7, stocks of POY mainly increased by around 10 days, mainly in big polyester plants, fewer at around 1 week. Inventory of FDY was shorter around 10-11 days and longer around 15 days. Stocks of DTY have been above 20 days.

The production suspension schedule of twisting units was normal during the National Day holiday. Comprehensively, the run rate of twisting units declined by 20-30% during the National Day holiday, and many shut down for around 3 days, longer around 5 days. By Oct 7, the comprehensive run rate has recovered to around 70-80%.

Comparatively, the production suspension of fabric mills outpaced that of twisting units. Operating rate of warp knitting plants decreased by 20-40%, and many stopped for around 3 days. More water-jet plants shut down for holiday and the schedule was longer amid big pressure. Currently, warp knitting plants have restored production, and the recovery of water-jet plants was slower. Generally, less twisting units shut down for the National Day holiday this year, which was the key reason supportive to low POY stocks. Fabric mills witnessed big burden, so the shutdown proportion was relatively higher, rendering inventory of FDY and DTY bigger. Sales of grey fabric failed to improve, and the average stocks remained high. Destocking was relatively slow.

3. Operation forecast for the polyester market after National Day holiday
Feedstock prepared by downstream plants has been low now, and downstream plants may restock on Oct 8-10 to cover the pressing demand. Polyester filament yarn plants have saw bigger inventory pressure. Stocks of POY were moderate, while FDY and DTY units witnessed certain inventory burden. Market players held weak mindset. If there is no stimulus, PFY plants are of big possibility to cut price for promotion.

Downstream demand improved in late-Sep, but the profit and inventory pressure did not reduce apparently in twisting units and fabric mills. Twisting units and fabric mills are still expected to face pressure in terms of selling and profitability in later period, and controlling run rate may be the major solution. Run rate of twisting units and fabric mills is supposed to recover to the pre-holiday level but the continuity may be limited, which may reduce slowly in late-Oct when orders for the Double 11 and the Christmas will be tail-in work by that time.

For polyester plants, Oct is a special period affected by the National Day holiday and in expectation of weaker demand in later period. Selling pressure is expected to ascend obviously compared with Sep, price is anticipated to be in weak correction, cash flow is likely to shrink and stocks may accumulate. Generally, polyester industry is expected to start seeing accumulating contradiction in Oct, but it will take time to witness falling run rate. Polyester polymerization rate is not expected to reduce at least before late-Oct.
[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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