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Insight | Time: Feb 6 2021 4:35PM
Polyester and downstream market performance before and after LNY
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Polyester companies witnessed moderate market fundamental before the Lunar Chinese New Year and price climbed up amid mounting cost.

Polyester enterprises did not have inventory burden before holiday. Many plants saw pre-orders. Comprehensive stocks of PFY were flat with the corresponding period of last year and those of PSF were far lower than last year.

Most polyester products were priced marginally above the cost. By Friday, cash flow of PET fiber chip, PET bottle chip, PSF and POY150D was at 42yuan/mt, 337yuan/mt, 507yuan/mt and 217yuan/mt respectively.

Turnaround size of polyester fiber market apparently reduced this year before the Lunar Chinese New Year with easing pandemic and in expectation of better demand. Therefore, polyester polymerization rate was high, which is estimated to be 88%, 85% and 92% respectively in Jan-Mar.

Based on demand from polyester market and supply of feedstock side, stocks of PTA are expected to accumulate in Q1 2021, with the increment similar to that in 2018 but lower than that in 2019. Inventory of MEG is likely to reduce, better than 2017-2020. Therefore, PTA market is likely to see weaker fundamental than MEG.

PFY inventory of downstream buyers were around 20 days before this Spring Festival, higher than 2019-2020, and stocks of grey fabric were around 20 days, flatting with 2017 and 2020 but higher than 2018-2019. Stocks of water-jet fabrics were relatively higher than other varieties.

The tempo and scale of production suspension on downstream market was basically consistent with earlier estimate. It is 16 days before the Spring Festival holiday when operating rate of fabric mills declines to around 30%, basically close to that in past years.

Operating rate of fabric mills and twisting units may be around 4% and 13% respectively during the Spring Festival holiday based on arithmetic mean, while is anticipated to be 5-10% and 20-30% according to weighted average.

Different from past years, some workers did not go home for holiday this year, accounting for 20-30% of the total based on the data from many regions. According to the national migration scale index from Baidu, the index from the the 7th day to the 24th of the twelfth lunar month moved down by 40% and 45% respectively compared with 2019 and 2020.

Therefore, although pre-holiday operating rate of fabric mills and twisting units changed little compared with past years, the restart of downstream plants may be earlier after holiday as some workers stay put for Spring Festival holiday. Downstream run rate is likely to recover to 30-50% before Feb 26, but the return of workers that went hometown for holiday may be slightly later than 2017-2019.

Polyester companies did not see big inventory burden before this Spring Festival and are supposed to see inventory burden around 1 month after Spring Festival by convention.

Inventory burden of polyester plants may be peaked around 20-30 days based on historic data, which may be not small in 2021 as the turnaround size is small. If feedstock price is weak after holiday, upstream feedstock enterprises may face intensified pressure from mounting stocks. If feedstock market is firm after holiday, stocks of polyester companies may be transferred to downstream market periodically. PFY companies may see mounting stocks later.
[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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