June to July is the traditional off-season for the polyester market, but this year’s performance is completely different from the “off-season”. The operating rate of the polyester industry is at a high level in the past three years, but the inventory is at a low level in the past three years. This “boom” in the off-season has exceeded the expectations of industry and market participants. Recently, reporters from Futures Daily visited the polyester industry chain in South and East China and clearly felt that industrial enterprises have strong expectations for the recovery of domestic and external demand for polyester terminals. The resilience of domestic demand and the improvement of external demand further explain the question of “where did the goods go?” The current polyester industry chain is developing in a virtuous cycle, but whether the real “Golden Nine and Silver Ten” peak seasons will arrive as scheduled remains to be verified by time.
Unexpectedly, this off-season is a bit “busy”
Talking about the changes in the polyester market this year, “booming production and sales” exceeding expectations is the most common feeling among industrial enterprises. A reporter from Futures Daily learned that, especially on June 14, polyester production and sales surged, with production and sales on that day reaching more than 400%, setting a new high this year.
“This off-season is indeed somewhat unusual.” A relevant person in charge of a polyester company in Jinjiang said in an interview that since May, the operating rate of the polyester industry has continued to rise, reaching 93% in June, the highest level during the year. The current operating rate remains unchanged In the highs of over 90%.
In this regard, Liu Siqi, an analyst at Zijin Tianfeng Futures, said that June to July is the traditional off-season for the polyester market, but this year not only new devices have been put into production, but the new production capacity in the first half of the year exceeded 5 million tons, and inventory is not high and cash is available. While the flow rate is still acceptable, the operating rate has stabilized at 93%-94%, reaching a high load only seen in peak seasons in previous years. These performances far exceeded market expectations.
According to interviewed company personnel, from late June to the present, considering that the price of polyester is at a low level during the year and the supply of some polyester filament specifications is tight, downstream weaving companies are worried about rising raw material prices when demand comes, and some warp knitting and water-jet factories have In preparation for winter fabrics in the second half of the year, stocks are being stocked in advance. Polyester filament production and sales data have improved, industry inventories continue to decline, and market trading sentiment is warmer.
Similarly, the operating rate of downstream weaving has been generally low since the second half of last year, and the demand side has been mediocre. In order to avoid operating risks, factories have more control over cost inventory and raw material inventory. Although July is in the traditional off-season, in order to protect workers and fixed customers, production is still going on, but the operating rate is lower. Supported by the lack of concentrated weakness in the demand side and low raw material inventories, the polyester market has shown a trend of “not weak in off-season”.
It is understood that against the background of the sharp increase in the price of raw material PTA in the early stage, the polyester market sentiment improved. However, polyester factories did not follow up and raised their quotations. Instead, they implemented multiple rounds of profit-sharing promotions. Therefore, at the time when downstream stocks were intensively replenished, production and sales appeared. Overall high volume scene.
In fact, price reduction promotions are more common in the polyester market, especially in the off-season. Relying on the price-for-volume method to ensure polyester factory inventory is more “healthy”.
“The profit-sharing promotions of polyester factories have triggered an increase in production and sales. Usually, factories carry out promotional activities of varying duration after a large accumulation of finished products in order to achieve the purpose of reducing inventory and continuing production.” Qiu Qianqian, a chemical analyst at Jinlianchuang, told reporters, from the industry From the perspective of the terminal weaving market, there are stages in downstream stocking. The polyester yarn promotion cycle often matches the stocking cycle of terminal weaving raw materials. When there is a rigid stocking demand for raw materials in terminal weaving, polyester factories generally choose to cut prices for promotions, or when raw material prices rise, they choose to maintain the original price of polyester yarn and transfer profits to downstream companies in two ways.
During the visit, the reporter also learned that the price reduction promotions of polyester are mostly focused on polyester filament. The main reason is that raw material prices fell rapidly in the early stage, and production and sales failed to balance that month. In order to stimulate production and sales and control inventory, the factory took the initiative to reduce prices and promote sales. Usually, the results of price reduction promotions are a sharp recovery in market transactions, explosive growth in factory orders, and a significant decline in equity inventory levels.
In the opinion of many interviewees, polyester and downstream production have shown relatively obvious resilience this year. “The current operation of enterprises is generally stable, which is an important reason to support the steady start of production in the off-season. In other words, the entire industry chain is in a relatively virtuous cycle of exchanging price for volume.” The interviewed companies said.
Taking the initiative to go to warehouses, polyester factories “pack lightly”
It is worth mentioning that the operating rate of the polyester industry continues to be high this year, while corporate inventories have declined year-on-year, and polyester factories have been “packing lightly.” Taking polyester filament as an example, corporate inventories have continued to decline since the end of March and are currently around 20 days, which is at a low level during the year. Compared with the same period last year, the decrease was approximately 52.7%.
According to the reporter’s understanding, in the fourth quarter of last year, under the dual influence of repeated epidemics and weakening external demand, the operating load of polyester factories was much lower than the same period in previous years, allowing inventory to be eliminated.
“Due to poor operating results in the second half of last year, the overall polyester factory was in a state of high inventory.” Li Mengting, manager of the polyester department of Wuchan Zhongda Chemical Group, said that destocking is very passive for the factory. In the face of high inventory, only price reductions can get through it. difficulties, and the downstream also hopes to replenish its inventory through the promotion of polyester.
In her view, in fact, since the second half of last year, in the face of passive accumulation of inventory, polyester factories have taken the initiative to remove inventory through multiple rounds of measures. After April this year, the inventory pressure on polyester factories has eased.The mood is high, and positions have been moderately replenished many times. The inventory of polyester products, led by polyester filament, has mostly been transferred to downstream links, and the overall inventory of the industry is at a low level.
A reporter from Futures Daily learned that with the partial transfer of the weaving industry to countries such as Vietnam and India, polyester exports this year have increased significantly compared with previous years. As export demand accelerates, part of the increase in polyester has been absorbed.
In this regard, Liu Siqi said that part of the weaving production capacity has been transferred to Southeast Asia, and the export products of the domestic textile chain have gradually shifted from clothing to upstream gray fabrics and polyester filaments. In the past two years, polyester exports have continued to rise. In addition, due to concerns that the Indian BIS certification for domestic polyester exports will expire in June, some demand shows signs of being “driven out of exports”, further increasing the export volume of polyester.
“The steady start-up of polyester and downstream operations is conducive to supporting demand expectations and market confidence. However, the polyester operating rate is already at a high level, and there is no shortage of raw materials for the time being. The market still holds a certain cautious view.” The interviewee said that in the short term It seems that there is the possibility of a smooth transition in the off-season of the polyester market, and long-term healthy development depends on the realization of actual demand.
In Liu Siqi’s view, the current industrial chain maintains a high operating rate, and all links have certain expectations of accumulation. “If internal and external demand at the end of the year is less than expected in the second half of the year, then inventory accumulation is expected to increase, inventory pressure will drive weaving to reduce the burden, and the polyester industry may experience negative feedback.” She said.
Reporter’s Observation: “Expected differences” may still occur in the second half of the year
The “sluggish peak season” in the first half of this year was a big blow to the polyester industry. From March to April, many viscose staple fiber companies were forced to cut prices for shipments, and the “unexpected” trend is still fresh in the minds of industry insiders. At present, it is the traditional off-season for the industry, but both inventory and sales are much better than expected, which has also caused industry insiders to have certain conjectures about the “expected difference” trend in the second half of the year.
During this visit, the reporter learned that although the current polyester market shows the characteristics of “not slow in off-season”, there are big differences compared with previous years: although the volume has increased this year, the price increase is limited, and corporate profits are not. high.
In this regard, Xi Jun, the current person in charge of Hangshi Chemical’s polyester futures, explained that from the survey, compared with previous years, the polyester market has seen a different situation this year. First, there have been some changes in the market sales model. In recent years, especially the past two years, e-commerce live broadcast has developed rapidly, and downstream sales have increased rapidly. In the past, products were sold through wholesalers layer by layer, and middlemen had to earn part of the price difference. After the rise of live broadcasting, the “price war” among e-commerce companies has become increasingly fierce, which has resulted in the phenomenon of “increasing sales but not increasing prices.” Second, whether it is polyester, PTA or PX, from last year to this year, they are actually in the cycle of capacity expansion. Especially this year, the polyester industry has added more production capacity. “Downstream texturing and weaving production capacity have expanded, so that the overall market sales are okay, but the price cannot go up, which ultimately leads to meager profits in the overall polyester industry chain.” Xi Jun said.
“In the first half of the year, the market generally expected that prices would resume their upward trend after the epidemic. However, due to the weak global macroeconomy and slow replenishment at home and abroad, the price increase was not as expected.” Yuan Wei, an analyst at Shenwan Futures, said that in the second half of the year, ” The “expectation difference” focuses on whether the peak season is prosperous or not.
During the visit, the reporter found that the current market views on polyester’s “Golden Nine and Silver Ten” are quite different.
Some interviewees believe that factors such as consumption downgrade and textile homogenization have seriously promoted the transfer of the textile industry to Southeast Asia, and international trade barriers have strongly suppressed overseas textile orders. The domestic textile industry will inevitably continue to face the above problems in the second half of the year. In addition, the instability of textile raw material prices has also led to sluggish performance of domestic and foreign orders.
“Considering from the perspective of cautious sentiment, the possible scenarios in the second half of the year are: new orders are scattered and communicated, and it is difficult to ‘turn around overnight’ or orders are concentrated to rush to work. For now, textile factories are more enthusiastic about building inventory, and have already seen autumn and winter. Orders are scattered sporadically, and the pre-positioning of demand determines that the improvement in the ‘Golden Nine and Silver Ten’ period will be limited.” said an industry insider interviewed.
At the same time, there are also positive voices in the market. For example, a factory that mainly engages in domestic trade has a relatively optimistic view of this year’s market. It believes that since the optimization and adjustment of domestic epidemic prevention and control policies, the “internal circulation” has continued to exert force, and domestic textile and apparel consumption data has improved. In addition, judging from the research data of Longzhong Information, the inventory of gray fabrics in weaving factories has been within a reasonable and controllable range in the past five years, and there is no drag on the market in the second half of the year.
“The market still has certain expectations for the ‘Golden Nine and Silver Ten’, but the current pressure is mainly concentrated on the weaving link, and we need to pay attention to whether terminal orders can significantly improve in the later period.” Feng Xiaofen, a polyester researcher at Founder Mid-Term Futures, said that if the order improvement is not obvious, Then as the inventory of gray fabrics accumulates, it may form negative feedback to the upstream of the industry chain. If orders improve significantly in the later period, the pressure on the weaving process will be released, and the polyester industry chain will be in a virtuous cycle.
In Yuan Wei’s view, the current polyester market has formed optimistic expectations of overseas destocking. However, considering the slow recovery of overseas demand, the “expected gap” in the polyester market will still appear in the second half of the year, and the quality of the “Golden Nine and Silver Ten” will need to wait. verify.
During the investigation, the reporter learned that the boundaries between the off-peak and peak seasons of the polyester industry have become blurred in the past two years, and downstream companies will take the initiative to restock when prices are low. At present, there is stocking behavior in the middle and lower reaches of the industrial chain. Whether the “off-season is not weak” will overdraft demand depends on whether the performance of terminal orders this year exceeds expectations. If the order performance is average, the terminal demand is insufficient, and the early stocking is difficult to fully digest, there may be a “slow peak season” situation, which will eventually lead to a passive reduction in terminal load.
Verification of �.
During the investigation, the reporter learned that the boundaries between the off-peak and peak seasons of the polyester industry have become blurred in the past two years, and downstream companies will take the initiative to restock when prices are low. At present, there is stocking behavior in the middle and lower reaches of the industrial chain. Whether the “off-season is not weak” will overdraft demand depends on whether the performance of terminal orders this year exceeds expectations. If the order performance is average, the terminal demand is insufficient, and the early stocking is difficult to fully digest, there may be a “slow peak season” situation, which will eventually lead to a passive reduction in terminal load.
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