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Insight | Time: Jul 23 2021 9:22AM
Influence of power rationing on chemical fiber industry in Hangzhou
 
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Recently, some companies successively received the notice of power rationing in Hangzhou, Zhejiang:

 

Xiaoshan District: the consumption of power will be limited from Jul 23 to Sep 30, which will be 20% of that in Jan-Apr. The total production will reduce by near 14 days if the output is scaled down by 20% during the 70 days.

 

Qiantang New District: the total energy consumption in Q3 is expected to be cut by 10% compared with the corresponding period of last year, or to suspend or cut production for 15 days.

 

Dajiangdong District: curtail production by 20% amid current energy consumption

 

In general, there may be around 15 days of production loss in Hangzhou if strict implementation is seen.

 

Hangzhou is a major chemical fiber production base in China, covering polyester, nylon and spandex industry.

Polyester industrial chain

Feedstock:

There is no PX, PTA and MEG capacity in Hangzhou.

 

Polyester products:

Rongsheng, Hengyi, Dongnan, Senkai, Kaishi, Lianda, Huacheng and Donghua are polyester enterprises in Hangzhou, covering 6.86 million tons/year of capacity and accounting for 10.7% of the national total. Most units are accompanied by direct-spun PFY, occupying 86%, followed by PET fiber chip and direct-spun PSF capacity, taking up 11% and 3% respectively.

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Donghua plans to turn production to PET fiber chip from PFY and it will curtail DTY output, which will start from Jul 23. Most companies do not confirm to cut production or start turnaround temporarily, depending on later status. If the power rationing is carried out strictly, some companies may adopt the same measure like Donghua. The profit of polyester products was tolerable now. Spinning and twisting require more power among polyester value chain. Some companies may choose to cut the production of PFY varieties with low profit and high inventory and suspend the production of some twisting machine. PFY producers are more likely to curtail the production of coarse FDY. However, the production of PET fiber chip will rise when that of PFY is slashed, which will exert small influence on the polymerization production.

 

Chip-spun, twisting and fabric manufacturing sector:

Chip-spun PFY accounts for near 20% in Hangzhou, mainly colored yarn. Some factories do not get the notice of energy consumption limit, and some have received the notice while still run at full capacity now.

 

There are thousands of twisting machine in Hangzhou, taking up above 10% of total polyester twisting machine in China. As for fabric manufacturing market, there are circular knitting machine, water-jet machine and rapier loom in Hangzhou.

 

Factories receiving the notice expressed that they will watch and see and decide the final measures based on the actual implementation strength. Coupled with heat weather, some may cut production, while they may not take the initiative to suspend production due to moderate orders and profit.

Nylon industrial chain

CPL:

There is only one CPL company in Hangzhou-Baling Hengyi, accounting for 9.8% of the national total. It received the notice but the production of CPL is not expected to be affected.

 

Polymerization:

The nylon polymerization capacity of Hangzhou takes up 14.2% of the national total. Almost all enterprises have got the notice on electricity consumption restriction. At least 8.1% of the capacity is not estimated to be impacted.

 

NFY:

The capacity of NFY in Hangzhou occupies 8.5% of the national total. Currently, the capacity of enterprises that received the notice accounts for 2.8% of the national total, while some have not confirmed their final plan. The capacity of enterprises that did not received the notice accounts for 5.7% of the national total.

Spandex industrial chain

There are 3 spandex companies in Hangzhou, covering 56kt/year of capacity and accounting for 6.6% of national total. Only Hangzhou Sunrise is in the list of enterprises required to restrict electricity consumption. Sunrise maintains diversified operation and its spandex unit mostly run at full capacity by convention.

Summary

Some polyester, spandex and nylon producers have received the notice of power rationing in Hangzhou, but the final implementation needs to observe the strength of government. According to the profit and inventory on spandex, nylon and polyester value chain, yarn producers do not hope to implement this notice, particularly spandex factory, followed by PFY producers.

 

If this policy is implemented strictly, it will exert small influence on nylon and spandex market but have relatively bigger impact on PFY market. As for the polyester industrial chain, filament yarn and downstream production will be impacted more, while the influence on the feedstock and polymerization field may be limited. 

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t but have relatively bigger impact on PFY market. As for the polyester industrial chain, filament yarn and downstream production will be impacted more, while the influence on the feedstock and polymerization field may be limited. 

[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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