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Insight | Time: Feb 11 2020 1:10PM
How will polyester polymerization rate fare?
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The appearance of the epidemic near the Spring Festival hit market and reversed the tendency on polyester market.

Downstream companies successively shut down for holiday in mid-Jan, and more polyester units started having turnaround, but most finished maintenance before the Lunar New Year holiday, with the polyester polymerization rate staying around 74%. Some polyester units were supposed to resume operation in early-Feb, and the polyester run rate was anticipated to be under upward course, which was estimated to near 85% in Feb before the Spring Festival holiday.

However, the recovery of companies was delayed affected by the epidemic. Units that intended to resume operation in early-Feb mostly postponed it into Feb 10 and afterward. Some polyester companies witnessed apparently ascending stocks amid high run rate during the Spring Festival holiday, and the inventory burden continued heightening after the recovery of end-users being delayed. Besides, price of crude oil and petrochemical products has obviously declined dragged down by demand, so the inventory at hand faced devaluating pressure. Besides, the supply of accessories was in shortage in some companies on constrained logistics, also impacting the normal production. Under such circumstance, more polyester units cut production or started maintenance, especially big companies. The daily production decreased by more than 1000 tons in some big enterprises. Therefore, the polyester polymerization rate accelerates reducing, at 61% now. 2 units will shut down for turnaround in the second half of Feb, and there is no other news on production curtailment or turnaround temporarily.

How will polyester polymerization rate fare?
Current polyester polymerization rate has been very low, and is supposed to climb up if there is no more production cut or suspension. However, the production recovery of companies face big uncertainty during the epidemic. The production depends on the return of workers, and the workers have to be isolated for 14 days after arrival. The overall recovery is a progressive process.

The recovery of logistic is the primary concern for companies now. Only when the logistic restores and the delivery starts can the feedstock supply and sales of products open, further curbing the polyester run rate from falling. If the recovery is slow, some companies are still likely to cut production.

Based on recent plan, many units are scheduled to resume operation after Feb 10, mostly not confirmed, so it is still likely to be postponed. The tendency of polyester run rate is temporarily estimated as following under the assumption that the restart is on time, extended by 1 week, 2 weeks and 3 weeks. Some units still do not confirm the restart plan, which is calculated based on 20 days of turnaround.

The polyester polymerization rate estimate differs a lot under different circumstances. According to current status, the restart is more likely to be extended by 1-2 weeks. The polyester polymerization rate is anticipated to be near 77% in end-Feb if the restart is delayed by 1 week, and may be near 69% if the recovery is postponed by 2 weeks.

Based on current situation, the Feb average polyester polymerization rate may be below 68%, and the uncertainty of Mar rate is bigger, which is temporarily estimated to be around 82-84%.
[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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