Recently, the polyester market has launched promotions one after another. Although factories are lowering their prices, the downstream market does not seem to buy it. The feedback from previous promotions is much worse. In addition, the chemical fiber factory’s production reduction plan, which has been rumored in the market for several days, is gradually coming to light. Judging from the published production reduction information, in addition to Dawo, Rongsheng, Jinlun, and some slice production reduction devices that have been stopped recently, there will be subsequent production reductions of nearly 5,000 tons/day, which translates into an annual output of nearly 1.8 million tons. Based on this estimate, the subsequent polyester load can be reduced to approximately 90%. The reason for the equipment’s production reduction is simply that the inventory is too high and the efficiency is not good.
Insufficient demand support, frequent price reductions and promotions
The reporter learned that due to the extreme fluctuations in raw material prices, polyester has a great negative impact. Polyester products, mainly polyester filament, have also passively adjusted prices following the raw materials, which has affected the purchasing sentiment of downstream merchants. Downstream purchasing has been cautious, production and sales have been sluggish for days, and filament companies have been forced to cut prices and promote promotions.
In this regard, Longzhong Information analyst Zhu Yaqiong said that in the first half of the year, there was no substantial increase in demand in the traditional peak demand season of “Gold, Three, Silver and Four”. The high cost of raw materials and the fermentation of overseas epidemics have led to sluggish demand for end-use textile and clothing. Since May, some end-use weaving companies have reported that orders have improved compared to the previous period. However, small batch orders are not enough to digest inventory, and it is difficult to see substantial improvement in demand. “Since the beginning of this year, the start-up load of the polyester industry has increased rapidly, with the average monthly start-up at more than 90%, and the terminal weaving start-up has mostly remained around 70%. The contradiction between supply and demand has become prominent, so the frequency of promotions for polyester varieties in the first half of the year is relatively fast.”
Take polyester filament as an example. In April, there were three rounds of concentrated preferential promotions. Downstream buyers bought at low prices. Polyester filament companies experienced a destocking effect in the short term. However, pulse-type production and sales overdraft demand in advance. After the event, the market became increasingly deserted, and as the frequency of promotions accelerated, promotion time points also became nodes for downstream purchasing. Because market outlook was pessimistic, users also purchased more on demand to alleviate the pressure on raw material inventory.
In May, the terminal weaving market has attracted much attention. Since 2021, the weaving market has experienced a situation of “not weak in the off-season and not strong in the peak season”. The market is focusing on All are in the domestic weaving factories. Whether the market is good or bad, the number of orders is large or small, everyone’s attention is focused on the downstream. The RMB exchange rate is soaring, bulk commodities are soaring, and sea freight remains high… …The editor asked, why has the textile market been flat recently, and even has a downward trend?
The return of orders from India is not as “good” as imagined
The raging COVID-19 epidemic in India not only drags down the country’s economic recovery, but also affects the supply chains of many industries around the world, and the textile industry is one of them. Recently, there has been news that a large number of textile orders from India have been transferred to the Chinese market. However, the reporter’s investigation found that although many domestic companies did receive some transfer orders, these orders were not as “good” as imagined.
Xu Dong, the person in charge of a large textile company in Shandong, told reporters: “Return orders are not all placed by Indian customers, but are placed directly by European and American customers, and some are placed through Southeast Asia. The customer changed hands. We also received a small order last month. The production volume of this order was not large, but the delivery time was short, only 3 weeks, so the profit was not high.”
As for the return of orders from India, some textile export traders in coastal areas do not feel strongly. “These so-called return orders are mainly for mid- to low-end processed products, and most of them are ‘small bulk and short-term’ orders, so we generally do not If you can take it, the profit is not high and the risk is high, because once the epidemic situation improves, these orders will be transferred back, and you may end up spending time with your wife and losing your troops.” Mr. Chen, general manager of a company in Ningbo, Zhejiang, told reporters. At the same time, the customary “Gold, Three, Silver and Four” are coming to an end. Although there are some domestic autumn and winter orders and export orders to support the off-season market, the epidemic situation in Southeast Asian countries such as India, Pakistan, and Bangladesh is full of uncertainty, and the orders that have returned in the early stage have been Short orders and small orders are the main ones. Textile companies are very cautious in accepting orders, and demand growth is not large;
The reason why the replenishment progress of textile companies in the recent stage is lower than industry expectations, according to the survey It seems that cash flow of some small and medium-sized enterprises is generally tight, and raw materials can only be purchased as needed.
Limited production, guaranteed prices, and promotional strategies are undoubtedly poisonous to quench the thirst of polyester factories
“Phaseical Promotional activities have not substantially improved the high-pressure inventory situation of enterprises, and most downstream users have adapted to the promotional purchasing model. Therefore, if there is no promotion of promotional activities in the later period, polyester sales resistance will further increase, and the focus of market transactions will also be at one time. The sales volume has continued to drop during the promotion activities. When the company’s cash flow reaches a state near the break-even line, the company will inevitably consider limiting production and protecting prices. The promotion model is undoubtedly a poison to quench thirst for the polyester industry.” Zhu Yaqiong said.
Similarly, in Zhu Lihang’s view, frequent price reduction promotions are not a good thing for the industrial chain, affecting the profits of polyester manufacturers. Polyester factories have also gradually begun to overhaul, and polyester Construction starts are gradually weakening, and the support for rigid demand for raw materials will also weaken month-on-month. “Zhu Lihang”��.
At present, in the downstream polyester market, products such as bottle flakes, staple fiber and chips are already at breakeven or losing money, and the huge profits of filament products are also being squeezed. CCF data shows that as of last Friday, DTY and FDY inventories have been higher than the same period in the past five years, and POY inventory is at a high over the same period in the past five years.
“At present, the downstream polyester end is generally weak, with profit compression and high inventory, resulting in an increase in equipment maintenance. It is expected that the load will decline significantly in the later period. The polyester terminal weaving link has entered the off-season. However, short-term terminal orders have increased due to the impact of 618, and there is still support in the short term, but orders in the later period are still small, especially overseas orders have not yet recovered, and the overall downstream terminal demand support is still weak.” Jiang Shuopeng believes that in the weak terminal demand, production and sales When the market continues to weaken, the polyester segment achieves the purpose of destocking through price reduction promotions to promote production and sales in the short term, but it cannot improve the contradiction between supply and demand.
There were three or four filament sales promotions from April to May, and each time the production and sales volume increased on the same day, but the inventory soon began to return, and it could not be reduced, and this was still based on Downstream loads are currently on a high opening basis. It is not difficult to imagine what will happen to filament sales once the downstream load drops! </p
