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Insight | Time: Jun 1 2022 1:21PM  Editor:Tina Kong
Why sales of polyester filament yarn continue improving?
 
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Sales of polyester filament yarn (PFY) continued improving since last Friday, with sales ratio at 370%, 130% and 160% on last Friday, this Monday and Tuesday by P.M.3:00 respectively. Why can sales of PFY keep rising amid sluggish downstream market?


Prices of PFY rapidly climbed up in May, with increment at above 1,000yuan/mt by end-May. However, price of grey fabric was hard to advance. There was no orders after offers increased in some plants. In addition, sales were mainly under previous price when orders were placed. DTY market witnessed similar performance. Price of POY rose much more than that of DTY. Fabric mills and DTY producers saw apparently increasing losses in May. Under such circumstance, downstream buyers showed bigger resistance to rising raw material prices from the second half of May and presented stronger intention to cut production. The operating rate of downstream plants dropped again, with the run rate of fabric mills down by 12 percentage points from early-May to 52% last week and that of DTY plants falling by 15 percentage points to 63% compared with early-May.

 

With strong resentment and slipping operating rate, why can sales of PFY continue increasing? Downstream plants did not see obviously better orders and were under losses based spot raw material price, while sales of PFY were good, really hitting expectation. The root may be changing attitude toward feedstock price trend. Some downstream companies gradually accepted high-priced PFY.


Date Description
5-May PFY price rose by 100yuan/mt in the morning and sales were bleak. PFY price was raised by 200yuan/mt in the afternoon. Sales ratio of PFY soared to 150-160% by P.M.3:00.
13-May PFY price held flat in the morning but was increased by 100yuan/mt in the afternoon. Sales ratio of PFY surged to above 210% by P.M.3:00.
17-May PFY price held flat in the morning but was adjusted up by 100yuan/mt in the afternoon. Sales ratio of PFY hiked to above 150% by P.M.3:00.
May-23, May 28, May 30-31 Price was steady on the morning while sales apparently rose in expectation of rising price.


PFY companies raised offers while the discounts were available in actual trading. Under such circumstance, sales of PFY turned better, stocks fell and downstream players gradually changed their expectation toward the PFY price trend. Some downstream enterprises started accepting rising PFY price instead of resistant to it.  


Many downstream companies faced a problem: to suspend production or keep running with high stocks and cash flow losses. Some plants have suspended production with strong resentment to increasing PFY price. Around 70-80% of water-jet fabric mills have stopped production for the coming Dragon Boat Festival in Changxing. For most factories, it is not a long-term strategy to suspend production regarding labor, loan, rent and various operation costs. When price of raw material is hard to fall, the problem they encounter will not change even if the production is stopped for one week or 10 days.

 

Some downstream plants were forced to replenish in advance for speculation even with higher PFY price. On one hand, they expected PFY price to increase and try to reduce the pressure from losses. On the other hand, they hoped to purchase PFY under lower price than the peers to be competitive in later sales. Therefore, speculative demand is expected to sustain when PFY price is still expected to curve uptrend.For PFY companies, reducing price stably and slightly will more favor destocking and the healthy development of upstream and downstream market as downstream grey fabric price is hard to move up and most downstream plants are under deficit. There is one risk to be noted: current uptrend is overdrawing future expectation. Once PFY price is not under upside streak, the whole industrial chain may weaken.


[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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