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Polyester filament end-users restock in advance with rebounding crude oil

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OPEC has started cutting output from Jan and Saudi Arabia strongly supports the reduction. Market players hold optimistic attitude toward the implementation of production cut. From Dec 31, 2018, prices of crude oil kept increasing, with increment for WTI and Brent crude oil at 17.05% and 16.35% respectively from Dec 31 to Jan 8.

Prices of PTA and MEG was pushed up driven by rising crude oil price and bullish news on macro environment, but prices of polyester filament yarn dipped and discounts appeared.

In recent days, transactions of PFY were mainly under discussion for large orders, and discounts was bigger for orders with larger volume, especially POY. 

Most PFY plants suffered great losses now after trading at low price increased. Taking the trading price for large orders of 150D/288F circular aperture and flatting as example, the losses per ton was around 300-400yuan/mt when the melting cost was around 7,000yuan/mt.

Sales ratio was once as high as 700%, 600% and 500% stimulated by sales increase after price declined, leading to rapidly slipping inventory, especially POY. The comprehensive inventory of POY dropped fast to below 10 days.

Surging crude oil price and low risk of PFY market under losses injected confidence to downstream sectors, and substantially falling inventory of finished goods and growing orders since Dec also enhanced the confidence of weaving and twisting units.

In Dec, domestic sales of grey fabric for water-jet improved apparently when PFY price increased, and stocks of grey fabric in water-jet plants reduced to around half a month or below from 1 month. Orders for fabric for warp knitting and circular knitting rose obviously, and some pre-holiday orders were placed to weaving plants in advance. Downstream market of weaving plants show higher buying interest before the Lunar New Year holiday, worrying Sino-US trade conflict to intensify after Mar and driven by the bullish news of falling shipping fee in Feb.

Operating rate of end-users tends to reduce in recent period with the approaching of Spring Festival, which will result into decreasing rigid demand, but the speculative demand before the Spring Festival holiday may be supportive to PFY market. once inventory of PFY declines prominently before holiday, the strength of production cut and suspension is supposed to reduce.

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