The Chinese New Year is approaching. As weaving companies take holidays one after another, looms stop working, workers go home, and polyester equipment also begins to undergo maintenance and shutdown.
On January 13, a 200,000-ton polyester spinning filament unit in Wujiang was shut down for maintenance;
A 250,000-ton polymer spinning filament unit in Taicang has been shut down for maintenance;
Two polyester plants with a total of 450,000 tons of a manufacturer in Fujian have been stopped. Adding materials, starting to stop for maintenance as planned…
As of January 13, polyester production has dropped to around 76%, and is still declining. The total production capacity reduction plus planned production reduction exceeds 12 million tons!
The intensity of maintenance is unprecedented, and inventory is the main reason
According to data monitoring from China Silk City Network, as of January 14, the overall inventory of the polyester market was concentrated in 10-19 days; specific products In terms of inventory, POY inventory lasts 4-7 days, FDY inventory lasts around 8-13 days, and DTY inventory lasts around 15-20 days.
If compared with the situation in the past two years, the inventory of polyester factories this year is much higher than in previous years.
When the inventory is too high, the market tends to be pessimistic about the overall market situation, and it is difficult to raise polyester prices. Often when a wave of market conditions or good news comes, the price of polyester yarn rises a little, but it will soon fall back. Let alone the continuation of the rise, it is difficult to even stabilize the price after the increase.
Under such circumstances, textile companies will naturally not take advantage of them to buy high-priced raw materials, and it is difficult to inspire the willingness to hoard raw materials.
Among them, polyester filament yarn in 2019 is a very good example. Because the inventory is too high, polyester factories have no confidence at all to increase prices. According to some The old experience is that weaving companies that “buy up but not down” often lose money. Therefore, at the end of the year, when we asked weaving companies whether they would stock up on raw materials for the New Year, almost all weaving companies said they would wait and see and would not stock up.
No money to buy raw materials , weaving companies have no intention and no ability
Polyester inventory is too high. In the final analysis, the downstream purchasing power is insufficient. .
Starting from the transformation of water-jet looms in Jiangsu and Zhejiang regions in 2017, the number of water-jet looms in China first decreased and then increased. In 2019, the number of water-jet looms A year of explosive growth.
According to normal circumstances, as the number of water-jet looms increases, the demand for polyester raw materials will naturally increase. However, the opposite is true.
Although the number of water-jet looms has increased and the production capacity of gray fabrics has increased, the demand for gray fabrics has been decreasing due to the market environment. This has resulted in a serious overcapacity of conventional products such as pongee and polyester taffeta on the market. Weaving companies have accumulated a large inventory of gray fabrics and accumulated a large amount of funds. Instead, they have no money to buy raw materials.
According to data monitoring from China Silk City Network, the average annual inventory of weaving companies in 2019 was more than 30 days, with the highest even reaching more than 42 days.
Under such circumstances, capital turnover is guaranteed in the future , “selling goods” has become a norm in the market, the price of gray fabrics has been further suppressed, and a large number of conventional products have fallen into a situation of low profit or even loss.
Producing products but not making profits has resulted in many factories nominally operating at full capacity in the second half of the year, but companies will still take weekend breaks to reduce production By reducing production through scheduling and other methods, the demand for polyester raw materials is obviously reduced.
Looking forward to a “good start” in the coming year, the inventory crisis may turn around
The current situation is that weaving companies have a large inventory of gray fabrics, but the quantity of raw materials is not large, while polyester factories have a large inventory of raw materials.
Whether this situation can be revitalized depends mainly on whether the market can pick up quickly after the Spring Festival and whether the market can recover after the first step of the Sino-US trade agreement is reached. Digest this benefit quickly.
Let’s think in an optimistic direction. If the number of US orders rebounds by then, it will boost the sales of gray fabrics. On the one hand, the demand for conventional products will increase, and the large inventory of weaving companies will be digested, leaving more funds in hand; on the other hand,, because the quantity of raw materials prepared at the end of the year is not large, once new orders are received, a large amount of new raw materials will inevitably be purchased, and the price of polyester raw materials is likely to rise sharply. If that happens, weaving companies must remember to prepare enough raw materials after receiving orders.
Of course, all this is based on the “good start” after the Spring Festival. If the market demand after the start of the new year remains the same as this year, and it is difficult for textile companies to “cash out” their inventory, the routine operations of “selling goods” and “dumping goods” in 2019 may continue into 2020.
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