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Insight | Time: Sep 29 2019 3:28PM
Analysis on polyester yarn before and after National Day
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Overall sales of polyester yarn have been stagnated since this year and the sales rate and volume are both less than last year. Affected by volatile PSF, polyester yarn mills turn more difficult to control the inventory of raw material and finished product. Besides, some spinners suffer losses due to stocking up raw material at a large amount and some are not sensitive enough to the market price and destock improperly, leading to quick accumulation of inventory. As time passes, the inventory has depreciated largely, especially in spinners in North China.

As the raw material of polyester yarn, even though PSF performs better than VSF and cotton, the profits of polyester yarn mills are compressed obviously. From the chart below, the cash flow of polyester yarn has not exceeded previous high since early this year. From Apr, it fluctuated fiercely and even moved to negative side in some months. It is rare to see that in recent years.

In Sep, when visiting to Fujian, major producing area of polyester yarn, the pressure on spinners was heard frequently. During this period, spinners kept destocking and many large plants also focused on lowering inventory instead of pursuing profits.

Operating rate of fabric plants has recovered since mid-Aug, which promotes the sales of spinners significantly. From then, orders of polyester yarn improved gradually and the price started to slightly rebound. The inventory of most spinners reduced apparently despite fiercely volatile PSF. The signs of peak season show up, but whether it can sustain still depends on the market in Oct. Currently, polyester yarn inventory stays at normal level. With National Day coming, some traders and end-users are likely to restock intensively for post-holiday use.

In short term, it may stimulate the sales. If the peak season comes as expected, the bearish market sentiment may be cheered up. Thus Oct may witness whether the market returns to normal status. However, it is noteworthy that even if the market improve, it will be still worse than previous years. In addition, 2019 Spring Festival will come in advance, so there is not much time left for the market to adjust. Therefore, the market is highly expected to improve and then tend stable.
[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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