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Insight | Time: Nov 7 2019 4:18PM
Polyester: fabric stocks drop, periodical demand anticipation revised
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Price of polyester filament yarn has kept falling in the second half of 2019 when new capacity on upstream market is expected to start operation, and downstream players presented weaker confidence toward demand in the second half of year after stocks failed to slip much in Sep-Oct, which further caused the appearance of logic like operating slash on polyester and downstream market.

New units of upstream market are still anticipated to start operation but some are delayed, without changing the direction of capacity expansion. Besides, the anticipation toward end-user and polyester demand will be revised slightly.

The reduction speed of stocks on downstream market accelerates since Oct.
Stocks of grey fabric accumulated in Sep and the operating rate of fabric mills rose. In Oct, stocks of grey fabric declined by around 6 days, and players became more cautious in restocking. Some plants cut run rate during the National Day holiday, but the operating rate of fabric mills rose in end-Oct as the delivery of partial orders was intensive.

In view of the stocks reduction, different regions and various varieties have differences.
Stocks of knitted fabric dropped well in recent period, mainly winter fabric like plush fabric, while inventory of water-jet fabric slipped slower. Stocks of lining and silk-like fabric were especially high.

Operating rate of fabric mills moves up after end-user market improved
The operating rate of fabric mills was earlier expected to reduce in later period in Sep with mounting stocks and stunted sales, in order to lower stocks. However, with rapidly reducing stocks of knitted fabric, operating rate of fabric mills ascended periodically. With low feedstock price, some downstream plants have the possibility to hoard up some grey fabric inventory even after orders finished, so operating rate of fabric mills may be firm for a period.

If operating rate of fabric mills sustains in Nov, stocks of PFY may not change much in Nov.
Downstream plants have high possibility to hoard up stocks when feedstock price is low. In addition, if feedstock price sustains firm or hit new low to buyers’ psychological level, not ruling out some plants to prepare feedstock in advance.

Stocks of PFY are not expected to accumulate much in Nov, so intensive O/R slash of PFY plants may be hard to emerge.

Some PET bottle chip plants plan to have turnaround in Nov, but some polyester units that had turnaround before will resume operation. Polyester fiber plants are unlikely to intensively cut run rate in Nov supported by rigid demand and taking the Spring Festival issue into account. Hence, polyester polymerization rate anticipation is restored in Nov, not likely to decline intensively.
[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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