The upstream raw materials of short fiber, ethylene glycol and PTA, have fallen sharply one after another, causing the cost of raw materials to collapse one after another. In addition, the supply and demand side of short fiber itself is weak, causing the price of short fiber to accelerate downward again.
The cost of raw materials has collapsed one after another
Since October 19, negative cost feedback on the raw material side has continued. First, the sharp drop in coal prices triggered a sharp drop in the price of ethylene glycol. The spot price of ethylene glycol dropped from 7,275 yuan/ton on October 19 to just short of November 18. It fell to 5,040 yuan/ton in one month, with a cumulative decrease of 2,235 yuan/ton. The drop in ethylene glycol prices caused the cost of short fiber to drop by 760 yuan/ton. Before the sharp drop in crude oil, the decline in ethylene glycol prices triggered by the decline in coal prices had already caused a significant decrease in the cost of short fiber production.
South Africa reported the new coronavirus Omicron variant to the WHO for the first time on November 24. About 20 countries and regions have successively issued or are preparing to introduce entry restrictions for flights and passengers from South Africa and many other African countries. In November On the 26th, international crude oil prices fell by more than 13%, which opened up room for PTA prices to fall.
The supply and demand side of short fiber itself is weak
However, just because the cost of upstream raw materials has dropped, it is not enough to cause the price of short fiber to continue to fall. If the fundamentals of short fiber are good and the price of short fiber is relatively strong, it is possible that the processing fee of short fiber will rise again. In fact, the supply and demand side of short fiber itself is also in a weak state. The first phase of Xinfengming’s 600,000 tons/year flexible customized short fiber project with a production capacity of 300,000 tons/year was officially put into operation on November 15. Xinfengming’s long-term focus In terms of filament production, its expansion into short fiber has adversely affected the price of short fiber.
From the end of September to mid-October, short fiber prices rose for a time, and processing fees continued to rise, triggering a significant rebound in short fiber operating rates. The operating load of short fiber has continued to rebound since the end of September, from 67% operating rate to 80.6%, a cumulative increase of 13.6 percentage points. During the same period, the operating rate of Jiangsu and Zhejiang looms only increased from 65.7% to 67.1%, an increase of only 1.4 percentage points. . The operating rate of looms in Jiangsu and Zhejiang has recovered slowly and has been lower than the same period in previous years. At the same time, downstream demand is weak, and the peak season is relatively slow. The supply side rebounded quickly, but the demand rebounded slowly. The market share of primary staple fiber was squeezed by recycled staple fiber, and the fundamentals of supply and demand were generally weak.
Improvement in fundamentals of primary staple fiber
In the field of short fiber production, there are two types: primary staple fiber and recycled staple fiber. The delivery product involved in short fiber futures is primary staple fiber. The market shares of virgin staple fiber and recycled staple fiber will have a mutual substitution effect. In terms of production scale, each accounts for half of the market. In the past few years, due to the impact of the ban on waste, the sources of low-priced raw materials for recycled staple fiber were limited, the production cost of recycled staple fiber increased, and the market share showed a downward trend. In 2021, the spot price difference between virgin staple fiber and 1.5D imitation Dahua has rebounded significantly from the previous two years. From the end of September to October, it remained above 1,100 yuan/ton, reaching a maximum of 1,706 yuan/ton. The market share of recycled staple fiber increased and squeezed Suppress the demand for primary staple fiber.
Due to completely different production methods, virgin staple fiber and recycled staple fiber have different cost logics. The cost of virgin staple fiber is mainly determined by the prices of upstream PTA and ethylene glycol, and is ultimately affected by international crude oil prices. The main cost of recycled staple fiber lies in the recycling, cleaning, processing and other links of old bottles, and each link has very strong cost rigidity. On October 18, the spot price of primary staple fiber fell from 8,307 yuan/ton to 6,847 yuan/ton on November 30, a cumulative decrease of 1,460 yuan/ton; while the price of recycled short fiber only dropped from 6,600 yuan/ton to 6,500 yuan/ton. , the price difference between the two fell back to 346 yuan/ton. The price of primary staple fiber fell rapidly, while the price of recycled staple fiber was relatively stable. The price difference between the two was quickly compressed to the lowest level in the year, close to the low level in previous years. This has stimulated a rebound in demand for primary staple fiber, and the operating load of primary staple fiber has risen to a high level, with limited room for further growth. Therefore, it is expected that the fundamentals of primary staple fiber supply and demand will improve in the later period.
To sum up, the sharp drop in crude oil has caused the cost side of short fiber to collapse, driving down the price of short fiber. However, as the price difference between primary and recycled short fiber narrows rapidly, the supply and demand side of primary staple fiber will improve. The decline in crude oil prices has accelerated the bottoming of short fiber prices, but short fiber prices will not always follow the decline of crude oil. As the supply and demand side improves, short fiber is expected to form a phased bottom in December. In addition, short fiber processing fees are expected to further rise to more than 1,500 yuan/ton.
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