1. Prosperity was high, and the concentration rate heightened further with added new capacity and mergers and acquisitions.
New weaving and twisting plants were ample in 2017, and supply of PFY was once tight. PFY plants witnessed low stocks and high profit. Therefore, even though the external environment was not very optimistic and domestic economic data reduced, PFY market still welcomed capacity startup peak in 2018. The new POY and FDY capacity hit new high since 2014. By the end of 2018, the effective capacity of direct-spun PFY approached around 30 million tons.
High concentration rate on PFY market exerted stronger influence on industrial trend since 2016, and the concentration rate continued edging up after some large plants added new capacity and finished mergers and acquisitions by the end of 2018. Among the 30 million tons of capacity, there are 8 plants with over 1 million tons of capacity, sharing around 66% of the total. Among POY and FDY plants, there are 4 companies above 1 million tons each, and the concentration rate of POY market was higher, with the total proportion of these 4 enterprises at 61%. Big plants enjoyed higher influencing power and stronger voice in pricing.
|Plants with more than 1 million tons of capacity|
|Number of companies||8||4||4|
2. Disturbed peak season and slack season—operating rate declined after staying high at first, and inventory was low in the mid-year but high in early-year and year-end.
Stocks of PFY curved an apparent “V” trend in 2018 with disturbed peak season and dull season. Inventory of PFY declined rapidly after the Spring Festival and the strength and speed of destocking was stronger and faster than past years. Stocks of PFY remained low for a long period till Aug, but accumulated in the fourth quarter after demand was pulled forward and downstream demand weakened with volatile PFY price. Actually, stocks of PFY in the fourth quarter of 2018 were higher than the same period of last year with intensive startup of new units.
3. Price of was in weak correction in the first half of 2018 but became volatile in the second half of year.
Price of PFY was in upward correction in the first half of 2018 mainly due to the timespread of the capacity startup between upstream and downstream market. The capacity startup of downstream market was faster than that on upstream market, resulting into tight supply on upstream market. In the second half of year, price of PFY moved up amid short supply in Jul-Sep when demand was not dull during off-season, coupled with influence from the feedstock market. In Oct-Dec, PFY price dipped with rising stocks due to pulled-forward demand, and demand was not sound during the traditional peak season.
The fluctuation in the first half of year was limited, and yearly high and low appeared in mid-Sep and end-Dec respectively. The gap between the highest and lowest price of POY 150D was around 4,210yuan/mt.
4. Cash flow narrowed, especially DTY.
In the first-third quarter, overall prosperity of the whole industrial chain was increasing, and the new weaving and twisting plants started operation earlier than 2017, so POY and FDY plants gained higher profitability under tight supply. However, in the fourth quarter, supply of PFY became not tight with faster startup of new units and low run rate of end-users. Cash flow was squeezed and POY and FDY plants suffered losses. Profit of DTY shrank more apparently than that of POY and FDY compared with 2017 after 2-year successively rapid capacity add.