I am afraid that everyone currently paying attention to the trend of upstream raw materials is silently analyzing in their hearts: whether the price of crude oil can break through the US$100/barrel mark.
Last week, international oil prices hit their highest level since September 2014, with Brent crude hitting $96.78 and WTI hitting $95.82. Although there has been a slight decline since then, the current oil price is actually only one step away from the $100 per barrel mark.
The trend of crude oil prices is closely related to the price of upstream chemical fiber in textiles. Although the continuously soaring oil prices have achieved “strong support” on the cost side, the “weak demand” in downstream textile weaving, printing and dyeing is also a reality that must be faced. After the Spring Festival in 2022 , the entire industry chain is still filled with a strong “anxiety” atmosphere.
Changes in crude oil prices will affect the costs of petrochemical companies, which will in turn affect the prices of petrochemical products, plastics, rubber, chemical fiber and other industries. Therefore, in the foreseeable future, oil prices will be affected by geopolitics and usher in substantial fluctuations on both the long and short sides, which will have a greater impact on the market of textile raw materials.
For textile companies, there is a high probability that they will passively digest the high oil prices in 2022.
Orders have not improved significantly
Weaving is not buying it, and polyester factories are facing greater inventory pressure
The first impact of the surge in oil prices is on the polyester and polyester industry. As raw material prices rise, it is reasonable for chemical fiber companies to increase their prices.
In 2021, the textile upstream chemical fiber industry has been rising all the way from the beginning of the year to the end of the year. However, entering 2022, the upward trend continues. At the beginning of 2022, with the increase in commodity prices, the quotations of chemical fiber products continued to rise, and the price of polyester yarn has been raised three times. For textile companies that have not prepared enough raw materials before the holiday, the intensive increase in prices at the beginning of the new year is indeed extremely worrying.
Simultaneously with rising prices, chemical fiber companies have high inventories.
Judging from the current polyester market, during the seasonal maintenance period before and after the Spring Festival this year, polyester factories did not experience large-scale load reductions, and the overall operating rate was higher than the same period in previous years. However, terminal weaving went on holiday as scheduled, leaving polyester factories with post-holiday inventory The pressure is higher than in previous years.
According to statistical data, as of February 8, China’s direct spinning polyester filament operating rate was 80.43%, down 2.96% from the year’s high and up 4.7% from the year’s low. Generally speaking, the fluctuation range of China’s direct spinning polyester filament yarn operating rate is limited. The overall silk production load is 8-10 percentage points higher than last year’s Spring Festival.
Polyester filament equipment maintenance and restart schedule before and after the Spring Festival
Supply showed a slow increase after the holiday. In February, 600,000 tons of polyester filament production capacity is expected to enter maintenance, while the production capacity with a relatively clear restart time is 1.15 million tons. Therefore, under the current situation where maintenance and restart are expected, polyester filament production will show an upward trend in the short term. The maximum increase is expected to be around 3%, with a daily output of around 77,000-79,000 tons.
It is reported that the overall inventory of the polyester market is now concentrated at 16-26 days; in terms of specific products, POY inventory is around 16-19 days, FDY inventory is around 16-17 days, and DTY inventory is around 17-25 days.
However, after the 15th day of the first lunar month, the production of downstream weaving enterprises will basically return to normal, and demand will slowly expand. However, this does not mean that downstream companies accept high prices. Currently, downstream companies only purchase a small amount of urgently needed replenishment. If there is no significant improvement in subsequent domestic and foreign sales orders, polyester factories may continue to face greater inventory pressure, and the entire textile industry chain will be under pressure. Still facing great pressure.
The most direct external force to resolve this pressure is the drop in oil prices. Obviously this is not the scope of textiles, nor is it an area that the textile industry can control. In the face of “unattainable” energy costs, stabilizing downstream demand has undoubtedly become an important part of resolving pressure on the industrial chain.
Downstream is unable to do what it wants
The three major terminal applications of clothing, home textiles, and industrial textiles are not optimistic.
Recently, the China Garment Association released the “Briefing on the Economic Operation of China’s Garment Industry from January to December 2021”, which conducted a comprehensive analysis of the industry’s operation throughout 2021. The report points out: From January to December, the industrial added value of enterprises above designated size in my country’s garment industry increased by 8.5% year-on-year, with a growth rate 17.5 percentage points higher than the same period last year, and an average decrease of 0.6% in two years (based on the corresponding number in the same period in 2019, using Calculated using the geometric mean method); enterprises above designated size produced 23.541 billion pieces of clothing, a year-on-year increase of 8.38%, a growth rate of 16.03 percentage points higher than the same period last year, and a two-year average increase of 0.04%.
The “Overview of the Operation of China’s Industrial Textiles Industry from January to November 2021” released earlier by the China Industrial Textiles Industry Association pointed out that from January to November 2021, the industrial added value of enterprises above designated size in the industry continued to decline, with a decrease of 18.9%, but The two-year average growth rate still reached 12.6%. The final summary of the report: The operation of the industrial textiles industry throughout 2021 will continue the current trend of in-depth adjustment; in 2022, as the high base effect gradually disappears,�, it is expected that various production and economic indicators of the industry will return to normal levels, and the industry will gradually exit the adjustment period and return to the growth channel.
The China Home Textile Industry Association recently released an industry operation analysis report from January to November. The report pointed out that since 2021, the production operation of my country’s home textile industry has generally remained stable and orderly. Affected by factors such as raw material prices and disruptions in international shipping, industry cost pressures have generally increased and industry profit margins have been squeezed. In terms of the market, both domestic and foreign sales have maintained stable growth, and slowing down and stabilizing is the overall trend of the industry.
Judging from the operation of the three major terminal application fields of clothing, home textiles, and industrial textiles, although the overall downstream demand seems to be stable, there is still a sense of inadequacy regarding the focus of continued growth in the future.
Under the current market expectations of high supply and inventory, cost-side support has shown weakness, and the upward space for polyester filament prices has been blocked. Some market participants are placing their hopes on demand in the peak season after the new year. On the one hand, the downstream raw material stocks are not high before the new year. On the other hand, according to the usual practice, market demand may have a small peak after the holiday. So whether the demand can take over the polyester filament market to continue to rise? According to our research, the downstream weaving market expectations are quite different. Coupled with the impact of the epidemic, we will wait and see whether the peak season can arrive in time.
</p
