|Inventory change of polyester products in Jan|
Polyester production is expected to be not low in Jan and feedstock inventory accumulation may be lower than anticipated.
By now, around 11.7 million tons of polyester production is anticipated to be cut or suspended from Dec to Mar, and around 8.9 million tons are scheduled to be intensive in Jan-Feb, affecting around 16.3% of operating rate.
|Polymerization rate and capacity adjustment before and after Spring Festival since 2014|
|Spring Festival||T/A,output cut (kt)||The lowest O/R around Spring Festival||O/R one month before Spring Festival||O/R one month after Spring Festival|
The lowest polymerization rate in the first quarter of 2019 may be around 76.4%, and the monthly rate during the month before and after Lunar New Year holiday is supposed to be around 80.4%., higher than 2017 but lower than 2018. Polyester plants may be active in production with small inventory burden after Lunar New Year holiday, and the key limitation is labor. based on current arrangement of polyester units, polyester capacity is expected to be higher than the past two years and the supply of polyester goods is estimated to be not low in the first quarter of 2019; thus, the inventory accumulation of PTA and MEG in Q1 may be smaller than earlier estimate.
Order placement of downstream sectors is put ahead and restocking anticipation intensifies.
|Operating rate reduction of looms before and after Spring Festival|
|Time of O/R below 30%||20-Jan||9-Feb||24-Jan||17-Jan||3-Feb||22-Jan|
|Days away from Spring Festival||11||10||15||11||13||14|
The time of intensive shutdown of twisting units and weaving plants changes limitedly compared with last year.
based on the data in recent 6 years, the time gap of loom operating rate down to below 30% is only around 5 days. Downstream plants shut down earlier this year mainly amid external factors like the shutdown of printing and dyeing for holiday, the end of transportation, the holiday start of polluted water treatment factories and the labor issue, not because downstream plants do not have orders or witness huge inventory burden.
On the contrary, weaving plants perform moderately before the Spring Festival holiday, with sound orders and low stocks of grey fabric.
It is learned that orders in some warp knitting and circular knitting plants can continue into end-Mar or even Apr. Current stocks of grey fabric in Zhejiang and Jiangsu have hit yearly low in 2018. Stocks may not rise much before Lunar New Year holiday as more weavers will close for holiday in later period.
Feedstock restocking greatly increases when downstream plants see low finished goods stocks and sound orders.
Downstream twisting units and weaving plants have started replenishing from early-Jan when PFY plants cut price for promotion. Current raw material stocks of end-users are mainly around 20-30 days, higher around 45 days. The restocking is supposed to grow after some plants recouped capital, and the comprehensive feedstock inventory may be higher than the same period of last year.
Comprehensively, demand on polyester market is not expected to be bad in the first quarter of 2019 with high polyester production and tolerable orders of downstream weaving market. But weaving plants restock a lot of feedstock before Spring Festival, so partial demand for PFY is pulled forward. Polyester plants also purchase some feedstock. External environment is bullish now. The pressure after Spring Festival is from the inventory and external environment change.