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Insight | Time: Jul 30 2020 10:01AM
PIY: industrial competition escalating amid intensive capacity expansion
 
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Fujian Billion’s 250kt/year PET fiber chip for polyester industrial yarn started operation successfully in late-Jul, kicking off the launch of new units on PIY market in the second half of year. The new units of Jiangsu Hengli and Zhejiang Sanwei are also put on agenda. PIY market is anticipated to face greatly rising pressure from supply side, and some companies have started pre-sales mode, with falling trading price. The mainstream price of ordinary high-tenacity PIY has reduced to 7,000-7,200yuan/mt, even lower at 7,000yuan/mt, near the historic low.

New PIY capacity in 2020
Company Location Capacity (kt) Startup Product
Hengli Jiangsu 200 From Jul Chip-spun PIY
Billion Fujian 250 From Jul Chip-spun PIY
Sanwei Zhejiang 200 From Sep Chip-spun PIY

New capacity expands intensively, with growth rate as high as 30%
Affected by the pandemic, some units that were scheduled to start production in the second quarter of year were extended into Q3. 1 line of Fujian Billion has produced PIY recently, and Jiangsu Hengli will start 1 line in end-Jul. These 2 companies will successively commence production in the following months. Zhejiang Sanwei’s polymer unit is scheduled to start production in Aug, and the spinning capacity will be launched in Sep-Oct. The capacity of these 3 companies amounts to near 650kt/year; therefore, the PIY capacity of China is anticipated to exceed 2,800kt/year by the end of 2020, with growth rate as high as 30%.


Export keeps decreasing and profit continues shrinking
Export occupies more than 1/3 of PIY production, but it keeps reducing in recent 2 years affected by the Sino-US trade conflict and the COVID-19 pandemic. US took up apparently decreasing proportion. According to the latest Customs statistics, exports of PIY totaled around 201.3kt in Jan-Jun, 2020, down by 6.45% on the year and 12.5% compared with the same period of 2018 respectively. Exports of PIY slipped apparently in this Q2, which have been lower than 30kt for consecutively 3 months.


As for the profit, high profit on PIY market like past 2 years has passed, with spread with bright chip at 5,000-6,000yuan/mt in 2018 and shrinking to 2,000-2,500yuan/mt now. Average cash flow of PIY market was near the cost line or with minor profit now, but is expected to narrow further with rising supply and fiercer competition. 


Generally, new PIY units successively start production this year, resulting into rising supply, but downstream demand weakens. Affected by the pandemic, exports of PIY are also stunted. That means apparently weakening supply/demand status on PIY market. Current profit of PIY has been squeezed to the cost line, and industrial competition is escalating. Small and medium-sized PIY companies may face bigger challenge. Crowding out effect may gradually embody in the future.
[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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