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Insight | Time: Jan 12 2018 4:26PM
Bullish upstream but sluggish downstream bring growing pressure to PFY
 
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Generally speaking, polyester industry has featured with bullish upstream but sluggish downstream recently. Polyester feedstock sector has performed better than polyester products. Polyester costs has increased by about 400yuan/mt in the past two weeks. Judging by current situation, polyester feedstock sector may maintain a bullish trend, unlikely to decrease much before lunar New Year. PTA market fundamentals appear healthy and the major influencing factor may come from bulk commodities. MEG fundamentals are also good but prices have reached quite high levels and may lower after lunar New Year holiday.

However, the end-user sector kept deteriorating, particularly Changshu weaving market. Given insufficient orders but high costs, Changshu weaving plants were inactive and plans to shut plants earlier than usual. Downstream plants lowered the operating rates so PFY consumption decreased. But seeing rising PTA and MEG prices, downstream plants enlarged PFY purchasing volume. At present, PFY inventory in downstream was lower at 7-10 days and higher at 20-30 days. Some low-stock plants continued purchasing PFY so PFY sales warmed up previously but sales will soften gradually.

Polyester plants have successively announced maintenance plans for lunar New Year holiday and the involved capacity has totaled to 8.34 million mt/yr by now, of which PFY capacity took up about 70%. Actually, PFY margins have narrowed since the latter half of November to around the break-even line in January. DTY situation was poorer than that of POY and FDY. If no more plants cut production, PFY inventory pressure may weigh on PFY market after holiday.

As to the end-user sector, if PFY prices maintain at high levels, the stocking-up volume for lunar New Year holiday may be not much. If the cost sector remain bullish, that will bring duel pressure to PFY market.
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