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Feedback of recent polyester end-user market

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 Many downstream market players expressed that the business during this Mar-Apr was worse than the same period of last year, and after researching the major fabric manufacturing bases in Zhejiang and Jiangsu, status quo of downstream market was as following:


1. Some end-user reflected that new orders were scant after the Spring Festival holiday although orders were sound before the Lunar New Year holiday, which were insufficient to support run rate. It was learned that the operating rate of looms has declined to 80% now from early high 85%, having further downward room in later period. The operating rate of circular knitting machines in Shaoxing and warp knitting plants in Haining and Changshu showed signals to reduce. But the current O/R at 80% was within normal average.



2. The inventory in twisting units and fabric manufacturing plants has apparently accumulated but was still controllable compared with historic high. Contradiction on downstream market is still accumulating, and price transfer has been very hard. Price of PFY moved up, but that of DTY and grey fabric was hard to chase up. Many twisting units and fabric manufacturing plants have suffered losses for a period based on spot feedstock cost.



Most end-users did not see sound orders after the Lunar New Year holiday, and sales became slow since Mar, which resulted into mounting stocks of grey fabric. Entering Apr, the accumulation speed accelerated after the earlier orders production completed. By now, stocks of grey fabric have surpassed the average level in 2018 amid continuously slack sales.

Relatively, water-jet fabric customers showed more robust mindset, but the inventory was also mounting, and the run rate still had support. However, the stocks accumulation speed of warp knitting and circular knitting machines was faster amid high production, which occupied many capital. The operating rate of warp knitting machines in Changshu and Haining and the circular knitting machines in Xiaoshan and Shaoxing has declined obviously.



3. The feedstock prepared of downstream market was mainly around half a month, and downstream plants managed to see profit based on feedstock purchased earlier, but the cost advantage weakened apparently based on current feedstock price after earlier stocks successively used up. The profit is expected to reduce further if such situation maintains.

4. Export orders which were placed in end-2018 or early-2019 were successively delivered, and domestic orders have not improved (normally starting improving in Jul-Aug); thus, May-Jun is supposed to be a slack season, and downstream sectors may face bigger pressure, to hoard up stocks or scale down run rate. Therefore, some downstream plants are anticipated to suspend production for a short period during the coming May Day holiday to ease pressure. Stocks of grey fabric are likely to accumulate and the run rate of downstream sectors may reduce in May-Jun, but the production suspension in a large scale like Sep-Oct, 2018 may not appear if feedstock market is not greatly volatile.

5. Stocks of PFY were slanting low now, but the feedstock inventory and finished goods stocks of twisting units and fabric manufacturing plants have apparently climbed up. Thus, the inventory of PFY is only transferred to downstream players’ hand. Demand growth rate of end-user market is not as firm as polyester production growth rate (growth rate of polyester output in Q1 was at 9.7%). Current stocks of downstream market was controllable, and contradiction does not outbreak temporarily.

In summary, PFY plants may keep witnessing stable profit in short run with not apparent inventory burden, but the demand may be pressed in medium run as downstream market is expected to remain modest temporarily.


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