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Insight | Time: Dec 2 2019 2:59PM
Polyester price still has downside potential
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Operating rate of fabric manufacturing plants was at 64% now. Operating rate of warp knitting plants in Changshu and circular knitting units in Shaoxing dipped apparently amid worse business, and that of water-jet enterprises were dipping slowly. Operating rate of downstream fabric mills is expected to reduce more rapidly in Dec. Some plants are scheduled to suspend production in Dec 10-15, especially plants with high inventory. Many units are anticipated to shut down for holiday in end-Dec or early-Jan, and few will sustain production until Jan with tolerable business. All in all, operating rate of downstream fabric mills will rapidly reduce in Dec, especially after mid-Dec.

As for polyester market, sales of polyester products may face big pressure with falling run rate of downstream market in Dec, especially after the downstream run rate down to below 60%. Polyester enterprises are expected to see rapidly accumulating contradiction in Dec and are supposed to focus on selling in later period with soft feedstock market and devaluation risk of stocks, especially big plants, which may dampen price and force small and medium-sized units to shut down for the Spring Festival holiday.

Current feedstock price is low, and some plants intend to have bottom-fishing in year end, but it is too early to do now. If external macro environment has bullish news or polyester plants scale down production in a large scale, PFY price safety margin will heighten, and downstream plants may be attracted to have bargain-hunting in year end. If above situation really happens, big-scaled bottom-fishing on downstream market is likely to emerge around the New Year’s Day holiday.

Based on the tempo on downstream market, contradiction on polyester market is anticipated to intensify in Dec, especially in late-Dec. A small portion of polyester plants are scheduled to have turnaround in Dec, and most will start in early-Jan. More plants may scale down production if pressure is apparently bigger from late-Dec. However, some polyester plants plan to resume operation in Dec, such as 600KTA from China Resources, 150KTA from Quandi and 100KTA from Sinopec Yizheng. The polyester polymerization rate is expected to be averaged at around 87-88% in Dec and around 77-78% in Jan 2020 after intensive turnaround appeared, which will be adjusted later according to the real arrangement in polyester plants.
[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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