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Insight | Time: Feb 7 2022 10:08AM  Editor:Tina Kong
Polyester polymerization rate opens high but has inadequate momentum
 
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The resumption of production on downstream market was not affected after the Lunar New Year's Day holiday (Jan 31-Feb 6) as the spread of pandemic was controllable. Downstream plants restarted production slowly in 2020 after LNY holiday affected by the outbreak of COVID-19 pandemic but resumed operation rapidly in 2021 supported by abundant orders. The production resumption of downstream plants in 2022 is estimated to be similar to that in 2019: some plants will resume operation on the eighth day of the first lunar month while most will restart after the Lantern Festival (15th of the first lunar month).

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Downstream buyers were cautious in purchasing PFY before the LNY holiday due to soft business and rapidly rising feedstock prices. The post-holiday PFY stocks among downstream plants was lower than the same period of past years. Downstream buyers may replenish PFY periodically while the durability may be weak as end-users will be difficult in accepting rapid price increase before and after holiday.

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The average stocks among polyester enterprises were around 7-10 days higher than the corresponding period of last year, opening high. Some downstream buyers are expected to replenish PFY when the stocks prepared before were limited and feedstock market performed strong. Polyester companies are estimated to see higher inventory burden in expectation of high polyester polymerization rate in the first quarter of 2022. Mar may see the highest inventory. Whether stocks will reduce effectively depends on the recovery of downstream demand.

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Domestic demand is expected to be weak while export demand is likely to present strong in 2022. Chinese government will be engaged in developing economy stably and stimulating domestic demand and the effect will be incarnated in the second half of year. However, the recovery of textiles and apparels consumption is expected to be very limited. As for export demand, the consumption is supposed to see descending growth rate from high level amid high inflation outside China. The Dec retail sales decreased by 1.9% on the month in US. Exports of textiles and apparels increase in Southeast Asia after production resumed. Export of textiles and apparels in China is estimated to marginally decrease compared with 2021.

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The production curtailment of polyester enterprises was relatively less during this Spring Festival holiday. The polyester polymerization rate is expected to hit expectation and to be high in the first quarter, which is ascending now and may rise to 90% in end-Feb/early-Mar. It is suggested to pay attention to the recovery of demand in the second quarter. The polyester polymerization rate is likely to have inadequate momentum in Q2 as the downstream demand may recover worse than anticipated, which has been revised down compared with earlier estimate. Currently, some PET bottle chip units are scheduled to start turnaround in Apr. Some PFY and PSF plants may cut or suspend production in May-Jun if the destocking is stunted amid modest demand.

[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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