As profits rebound, why can polyester products buck the trend?

Recently, the profits of various downstream polyester products have improved significantly, turning losses into profits. Although polyester production has exceeded the 90% mark, it…

Recently, the profits of various downstream polyester products have improved significantly, turning losses into profits. Although polyester production has exceeded the 90% mark, it is still steadily destocking. In an environment where the overall macro atmosphere is weak, why can polyester products ride the wind and waves and buck the trend? We believe there are three main factors: first, the price of raw materials has weakened, and the cash flow of polyester products has improved; second, terminal orders have been restored in stages, and demand has exceeded expectations; third, in order to lock in order profits, downstream companies have increased their willingness to stock raw materials.

Product profits rebound

Recently, with the end of the PX maintenance season, supply has rebounded and prices have fallen. PTA has also gradually come out of the tight situation in the early stage. With the cost decline and demand recovery, the profits of the polyester chain have been smoothly transmitted downwards, and each product has its own differences. level of profit recovery. In particular, the profit recovery of short fiber, POY, FDY and slices has been the most obvious, and long-term loss-making varieties have gradually turned losses into profits.

The most unexpected thing is that polyester chips have become the recent “star” instead of polyester bottle chips. From a phased perspective, the supply side of polyester chips has not increased in sync with other links, and the output of local devices has shrunk to a certain extent. On the demand side, since the second quarter of this year, the start-up of downstream chip spinning and other chip demand links has rebounded significantly, which has affected the chip production. The demand for chips has increased significantly; in the long term, as chips are an intermediate product in the polyester industry chain, the capacity expansion pressure caused by the expansion of polyester production is not sustainable, and the current capacity elimination period in the chip market is basically over, and the market is relatively Stable, so the recent slice efficiency has been relatively good.

Phased repair of terminal orders

Recently, released its 618 pre-sale battle report. Among them, the clothing category has experienced an explosion of orders. The overall pre-sale order volume has increased by more than 90%, mainly concentrated in men’s and women’s clothing, children’s clothing, sportswear, shoes and bags, etc., and many domestic and overseas big brands have achieved this. High-fold growth, with many top-notch shoes and clothing sold out within half an hour. At the same time, with the arrival of hot summer, categories such as swimwear, home wear, sun protection clothing, jackets, and outdoor backpacks have also achieved a year-on-year growth of more than three times. The recovery of demand for domestic clothing and textile products is accompanied by the mid-year sales and Children’s Day promotions, and the current order status is very impressive.

Although June is the traditional off-season for the apparel and textile industry, demand was heavy and lagging in the first half of this year. Therefore, currently, the textile order situation in June is acceptable. From the perspective of the textile industry as a whole, new orders for knitting are slightly weaker, with warp knitting and circular knitting machines mostly producing pre-production orders; water-jet orders are partially acceptable, and the better-performing varieties are mainly imitation acetic acid and imitation cotton products.

Enterprises’ willingness to stock up on raw materials increases

The operating rate of short fiber was not high during the same period, and the inventory level was also low, but production and sales were better than the same period last year, and cash flow losses were well repaired. Filament yarn inventory is also at a low level, and cash flow is also recovering well. From March to April, the price of PTA was too high, and downstream demand was relatively deserted. Many polyester companies were worried about the risk of falling raw material prices, and had no willingness and demand to purchase raw materials at high prices. This resulted in a negative feedback situation that reduced the burden on the polyester industry chain. At present, as the price of raw materials has been lowered and downstream demand has been further restored, the overall operating load of the polyester industry chain has increased, especially the chipping load has increased rapidly. The overall willingness to purchase raw materials in the downstream has increased, and the inventory of raw materials has increased, with an average of level above 10 days. As of this week, terminal raw material stockings are still concentrated in 1-2 weeks, with some being around a month high.

In May, polyester bucked the trend and rose. On the one hand, consumption increased significantly, mostly due to the backlog of orders from March to April. In addition, although domestic demand and exports have recovered to a certain extent, overseas clothing and gray fabrics are still in the process of being destocked, and consumption is weak. Therefore, even if domestic demand picks up, it will be difficult for foreign trade business to regain its previous popularity in the short term. In the next 2-3 months, overseas terminal orders may decrease significantly. On the other hand, polyester load continues to improve due to good polyester profit repair and acceptable inventory.

As of now, the high point of polyester load has exceeded 90%. This round of polyester load lifting has basically ended around the beginning of June, but it is expected to continue to maintain a high level before mid-June. The next downward trend needs to be judged based on the price of raw materials. At present, PTA prices have dropped significantly due to the negative impact of the U.S. debt problem, expectations of interest rate hikes, and macroeconomic recession risks. Even if the increase in the price of polyester has certain support for PTA, the collapse of the cost side and the expectation of sufficient supply will also drag down the market price of PTA. In the short term, the supply and demand pattern of PTA is good, with support forming at the bottom; in the medium and long term, PTA still lacks upward momentum, and we need to pay attention to cost and supply performance. The negative feedback phenomenon caused by the early surge in PTA is obvious to all. If the raw materials cannot continue to remain low in the later period, it will have an adverse impact on the release of terminal demand. At that time, the polyester industry may once again experience a phased reduction in burden.

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Author: clsrich