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Insight | Time: Oct 19 2020 8:30AM
Downstream plants still busy in finishing orders but cautious in restocking
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Downstream market was very hot after the National Day holiday (Oct 1-8). Orders for grey fabric surged and the orders in printing and dyeing plants hiked. Sales of chemical fibers and yarns surged. Players held cautious mindset toward downstream market in Sep, but the status in Oct beat anticipation.

Better performance of downstream market was mainly attributed to domestic sales, foreign trader and cold winter. Firstly, participants were cautious about the local orders for the online shopping spree on Nov 11 or Dec 12 previously but became confident about sales after the consumption data during the National Day holiday surged. Therefore, orders were placed intensively in Oct. As a result, orders needed to queue and the warehouse of printing and dyeing plants was full. Secondly, export orders, mainly orders for the Christmas Day in Europe and US, as well as some orders rumored to be transferred from India, were tolerable. The pandemic was relatively controlled better in China, so some orders flew to China from some Southeast Asian nations. Thirdly, this winter might be a cold winter. Thus, people’s demand for thermal products soared.

During the National Day holiday, retail sales of the country's 100 key large retail enterprises increased by 8.5% compared with the same period last year, which was 14.3% higher than the growth rate in the same period of 2019. The retail sales of clothing grew prominently, reaching a year-on-year growth rate of 16.8%, of which men's wear, women's wear and children's wear grew by 23.9%, 13.1% and 27.3% respectively; retail sales of food and cosmetics increased by 5.3% and 2.0% respectively; and the gold and silver jewelry market fell slightly, with retail sales down 0.8% from the same period of last year.

In addition, according to statistics of Taobao and Tmall, during the National Day holiday, sales of sports brand Anta official flagship store increased by 103%, leisure brand Semir official flagship store sales rose by 219%, PEACEBIRD official flagship store sales surged by 149%, menswear brand HLA official flagship store sales hiked by 136%, down jacket brand Bosideng official flagship store sales soared by 331% and home textile brand Mercury home textile sales increased by 218%.

All in all, orders improved unexpectedly in Oct was mainly due to the expectation of appreciating RMB, rising feedstock price and better local and export demand. Orders came from export orders partially, such as the orders for the Christmas Day and the transfer from India, but were mainly from local orders such as orders for the online shopping spree on Nov 11 or Dec 12, mainly orders for thermal products. Hot sales of thermal and cold proof fabrics stimulated the overall market atmosphere. It was said that supply of fabric was in shortage and some buyers even queued with cash to snatch fabrics, mainly refereed to the thermal and cold proof fabrics, including warp knitting and circular knitting velvet fabrics and water-jet cold-proof fabrics and elastic fabrics. Sales of fibers could echo this situation. Sales of porous DTY were very popular and price rose by as high as 1,000-1,500yuan/mt, while price of ordinary filament yarn only increased by 600-700yuan/mt. Sales of super fine denier FDY for high-density taffeta were also good, and those of other fibers such as spandex and yarns for fabrics for winter wear were also popular.

How long will hot downstream market continue? Based on the status mentioned above, crowed orders in Oct is expected to ease in Nov. Speculation on the market will also return to rational status. If the online shopping spree on Nov 11 can hit expectation, orders are supposed to chase up later but will be not as good as Oct. As for the procurement of feedstock, sales ratio of PFY has kept increasing for half a month. Current feedstock inventory is mainly above 25 days and higher at 1-2 months in some plants. Fabric mills and twisting units start purchasing feedstock under rational tempo, and sales ratio of PFY gradually retreats.
[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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