Although the impact of the new crown epidemic overseas has been expanding recently, and the situation in Japan, South Korea, Iran, Italy and other countries is not optimistic, judging from the domestic situation, the new crown epidemic has been gradually controlled in our country. At present, the overall trend of the national epidemic situation is improving, and phased results are remarkable. Except for Hubei Province, many other provinces have reported zero new cases for several consecutive days. As the pace of resumption of work continues to accelerate upstream and downstream of the industrial chain, the polyester market will gradually pick up. So what is the current pace of resumption of work? After the epidemic, will market demand usher in a retaliatory rebound?
1 Summary of terminal impacts during the epidemic
The impact of the epidemic on the polyester industry chain is more in two aspects: the suppression of terminal consumption and the delay in the recovery of raw material demand caused by delays in downstream construction.
First, the terminal textile industry, as a labor-intensive industry, mostly shuts down for holidays during the Spring Festival. The operating rates of looms and texturing in Jiangsu and Zhejiang dropped to 10% and below. According to the progress of resumption of work in previous years, the operating rate can reach 30% in about 7-10 days after resumption of work, and then rises from 30% to about 70% in the second half of the month. However, this year, due to the impact of the epidemic on the clothing market, and the high inventory of gray fabrics throughout last year (about 40 days), since the China Textile City began to resume work on February 18, the transaction volume that week was around 1 million meters, which is lower than normal. 10 million meters below, there is a big difference. The increase in load on the loom is therefore hampered. During the Spring Festival, weaving operations were almost zero, and less than 10% of the operations were resumed two weeks later.
Second, due to the slow increase in the load of terminal looms, the demand for polyester products has been further delayed, resulting in a later than expected increase in the polyester operating rate, and the long-term growth of polyester products. Time is in a state of price but no market. Polyester production and sales only started to be transacted in the second week after work resumed. However, as of March 2, the transacted volume was still around 20-30%. Book cash flow may be difficult to cash out. Polyester’s upstream raw materials are mostly integrated and scale-intensive production models. Upstream raw material production has been less affected by the epidemic. The deviation between the supply side and the demand side has increased the contradiction between supply and demand, leading to an unexpected accumulation of raw material inventories. According to current estimates, PTA social inventory may reach around 3 million tons in March.
Thirdly, since February, the polyester market has been generally trading, and production and sales have remained light. As of March 2, polyester production and sales were around 20-30%. Under normal circumstances, the production and sales of polyester yarn show a pulse pattern. It is expected that the time to return to this pulse pattern will be around mid-March, but the focus of production and sales in the early stage of recovery may be lower than in previous years.
2 Textile market recovery
As of now, two of the three major professional markets have resumed opening, but the Zhongda Textile Business District is still delayed indefinitely. Due to the delay in resumption of work, China Textile City has been closed from January 18 to February 18, which is the longest period in the past five years. During the Spring Festival in previous years, China Textile City usually opened its doors on the eighth day of the Lunar New Year, but this year it postponed its resumption of business for 18 days. As of February 27, a total of 17,320 merchants in China Textile City have resumed business, with a resumption rate of 79.6%. However, the recovery speed of trading volume is relatively slow. In the same period last year, after the 15th day of the first lunar month, the trading volume of China Textile City returned to a level of about 10 million meters in about 18 days. In 2018, it took a total of 17 days from the opening of the market to the recovery of trading volume to about 9 million meters. Due to the resumption of work in batches this year and the implementation of flexible business operations after the start, the market business hours are currently tentatively scheduled to be 10:00-16:00 every day (normal business hours are 7:30 am – 5:00 pm). It may take longer to return to normal trading levels around 10 million meters. Judging from the growth in trading volume last week and this week, if the current resumption progress is followed, it will take about a month to return to the average level of about 10 million meters.
Shengze Oriental Silk Market officially opened on February 21. Judging from the opening situation on the first day, market operations The rate of households that are eligible for resumption of work and market has reached 80%. Textile merchants from all over the world can come to purchase and negotiate, and full resumption of work and market will basically be achieved by the end of February.
The opening of the Zhongda Textile Business District is still delayed indefinitely. The reason is that Zhongda has 59 professional markets, nearly 23,000 merchants, and a total number of 150,000 people, including Hubei There are 52,000 registered personnel. Therefore, the time for its opening and resumption of production depends on how the epidemic in Hubei develops. However, the market also said that it can depend on the prevention and control situation, and early preparations for resuming work and production can be made in an orderly manner.
3 The recovery situation of textured weaving startup rate
Currently Look, the resumption of operations of texturing factories in Taicang, Changshu, Cixi, Changxing and other regions has increased, but the operating rates of resumption enterprises are generally dissatisfied, which is basically below 50%. The main reasons: low worker attendance rate, insufficient supply of auxiliary materials paper tubes and cardboard, and low back-end weaving and printing and dyeing operating rates. As of the 28th, the operating rate of looms in Jiangsu and Zhejiang has increased to 33%, and the comprehensive texturing operating rate has increased to 21%. Except for the Spring Festival shutdown, the peak season average operating rate of Jiangsu and Zhejiang looms is 70%-80%, it is also 60%-70% in the off-season; the comprehensive elastic operating rate is generally 80%-90% in the peak season and 60%-80% in the off-season. In previous years, when work resumed after the holiday, the operating rate basically reached half after the second week of resumption, and returned to the average peak season level after four weeks. This year, due to the different impact of the epidemic in different provinces and regions, the resumption of work is being gradually promoted. Judging from the current situation, the load increase rate of stretch weaving may be further accelerated in March. It is expected to return to peak season average levels by early April.
4 Downstream polyester recovery situation
Downstream polyester production has been mainly restarting recently. The polyester load has now risen to 64.1% from the previous 59.5%. And the load increase is expected to gradually increase.
Because the cost of crude oil has collapsed again, from a book perspective, the cash flow levels of various categories of polyester yarn are relatively high. However, due to the light transaction volume, it is difficult to realize the high cash flow on the books. The current inventory days of POY, FDY, and DTY are around 28-37 days, and polyester factories have high inventory pressure. This is also the main reason why polyester factories have adopted price reduction promotions recently. The inventory inflection point for polyester products may occur in the next two weeks.
Changes in polyester load directly affect the demand for polyester raw materials: the average monthly load in February was 61%- 62%, polyester production is around 3 million tons. As polyester plants are gradually restarted, the monthly polyester output in March and April is estimated to be 3.843 million tons and 4.43 million tons respectively. The extent of resumption of work in March is expected to be far greater than that in late February, and March and April are the peak seasons in previous years. It is expected that the polyester load may return to normal levels by the end of March. However, due to missing a month of the peak season, April may be a large-scale The process of removing polyester inventory, but the overall inventory level still cannot be digested to normal levels.
5 Future expectations
In the later stage, the overseas epidemic will continue to ferment. , crude oil stocks are expected to continue to decline, and PTA and ethylene glycol are relatively slow to increase due to polyester and terminal weaving loads. Next week may be weak and volatile. On the supply side, in order to control finished product inventory, polyester filament factories will Slowing down the speed of its load increase, but there is no substantial improvement in domestic demand at this time, and new orders from weaving factories are limited. In terms of foreign trade, the spread of the epidemic has caused certain uncertainty in foreign trade demand in the later period, and there is no obvious benefit on the demand side. Therefore, it is expected that polyester filament factories will still adopt preferential shipping and inventory reduction policies in the later period. </p
