Last week, news of a polyester factory cutting production touched the hearts of textile people.
News shows that following the production reduction of polyester factories in November, the second round of production reduction has recently begun: Tongxiang, Shaoxing, Ningbo and other polyester factories will gradually carry out centralized maintenance.
The scale of this production reduction is expected to reach more than 4 million tons, affecting the operating rate of polyester around 7.6% .
Affected by the production reduction factors of polyester factories, on December 17, the overall polyester industry chain was stable and improving. .
PTA, as of the close of trading on December 17, the main 1905 contract of PTA futures rose to a closing price of 6236 points, an increase of 66 points or 1.07% from the previous trading day.
In terms of polyester filament, the price of polyester filament has shown a stable and rising situation, with some factories rising slightly by 50-100 yuan/ton.
Why do polyester manufacturers reduce production? On the surface, it is a contradiction between high inventory of polyester companies and weak demand from downstream weaving companies. At the beginning of December, the inventory of polyester factories was already at a high level for the year. It is not yet the New Year. According to past experience, the inventory of weaving companies will reach its highest point around the New Year. The current inventory is too high, which will inevitably affect the polyester market. The factory’s product pricing and capital flow have been adversely affected. From the inventory dynamic chart, we can see that after December, the inventory of polyester factories has begun to decrease, but it is still at a high level.
But the high inventory is just a symptom, and there are deeper reasons. The author will briefly analyze it below. .
Polyester production capacity has increased rapidly in recent years
In recent years, the polyester market has entered a period of rapid development. As can be seen from the figure below, the production capacity of polyester factories has been rising since 2010, with huge increases every year.
In 2018, a total of 2.91 million tons/year of production capacity was put on the market.
The rapid increase in polyester production capacity is mainly affected by the following aspects:
1. After several rounds of reshuffles, polyester manufacturers have Several companies went bankrupt, and industry leading companies such as Hengyi, Rongsheng, and Tiansheng (Yifeng) took over. After these leading companies have established a firm foothold in the market, their pricing power over polyester yarns has been enhanced, and the profits of polyester filament yarns have also been guaranteed.
At this time, the polyester leaders had funds in their hands and were no longer satisfied with their existing market share. They began to expand horizontally and vertically. Vertical expansion refers to opening up the upstream and downstream industrial chains and beginning to develop the production capacity of PTA and PX. The multiple 10-million-ton integration projects that have been making a lot of noise recently fall into this category. The horizontal expansion is to expand the production capacity of polyester filament again.
The most representative one is the polyester leader Tongkun Group. According to statistics, from 2017 to 2019, domestic polyester filament production will expand by a total of 5.1 million tons, of which Tongkun will expand production. Reaching 2 million tons, accounting for 40%, it is the enterprise with the largest expansion of production. According to the 2016 annual report, Tongkun filament production capacity is 4.1 million tons, and the expansion of 2 million tons is equivalent to an increase of nearly 50% from 17 to 19.
2. In the past two years, the downstream weaving market has been in a boom cycle, and the demand for polyester filament has increased rapidly. Although traditional textile industry clusters in Jiangsu and Zhejiang regions such as Wujiang, Xiuzhou and Jiashan began to transform water-jet looms last year, the number of looms in Wujiang alone has been reduced by 100,000 in three years. However, judging from what we have learned, although these traditional textile cluster water-jet looms have been eliminated in large numbers, on the other hand, in northern Jiangsu, Henan, Anhui and other places, the number of water-jet looms is growing rapidly and has been transferred The total number is not less than 200,000 units. It can be said that water-jet looms are not only moving, but the number is also growing. As the number of looms increases, the expected demand for polyester yarn will naturally not decrease.
Downstream demand for polyester filament slows down
However, as the market gradually becomes saturated, polyester production capacity increases The growth rate has gradually exceeded the growth of demand for polyester filament in the weaving market. As can be seen from the figure below, especially after entering 2016, the growth rate of domestic demand for polyester yarn has slowed down significantly.
Domestic demand growth for polyester filament
Specifically, in July and August this year, due to the upstream With PX’s strength, the polyester market has experienced a surge, with PTA rising to 2,300 yuan/ton. After September, the entire polyester industry��It’s been falling all the way.
It rained all night when the house leaked. With the sharp rise and fall of polyester, the intensification of Sino-US trade friction, and the slowdown of domestic economic growth, the downstream weaving market has declined from the top. The half-year boom cycle begins to turn into depression.
In August, due to the impact of high-priced raw materials, some weaving companies with meager profits, especially some warp knitting companies, began to suspend production and work on a large scale. The start-up rate of looms dropped significantly, which had a negative impact on polyester. The demand for filament yarn further weakened, paving the way for subsequent high inventories in polyester factories.
Can polyester factories successfully destock?
From a statistical point of view, the production capacity affected by this round of polyester production cuts is 7.6%. The previous polyester operating load was around 87%. In terms of quantity, this The number of load reductions for the first start-up is less than 10%. In terms of production and sales, if production and sales were at 90% in the past, production and sales will be flat after production reduction. However, in the past, the production and sales of polyester factories have remained at 70-80% for a long time, and the 7.6% production reduction was not enough to reverse the decline in production and sales.
In addition, a large number of downstream weaving companies have entered the product development period. Due to the limitation of the payment cycle, unless the payment is received and shipped, it is difficult for the orders received now to be shipped before the Chinese New Year. Payments are made promptly, so the number of orders on the market is getting smaller and smaller. However, according to the experience of previous years, there is a high probability that the price of polyester filament will increase after the Chinese New Year. Therefore, most weaving companies will stock up on a wave of raw materials before the holiday. This wave of market conditions will help polyester companies clear part of their inventory.
On the other hand, last Friday, a piece of news detonated the circle of friends. News spread that due to the easing of Sino-US trade, three polyester factories in Ningbo received hundreds of millions of filament export orders.
With the continuous development of my country’s polyester industry, my country’s polyester Ester filament yarns are very competitive internationally. As the trade friction between China and the United States eases, it is not ruled out that more polyester factories will receive more large international orders in the future.
Editor’s note: For downstream weaving companies, what they are most concerned about is not the production and sales of polyester factories, but the price of polyester filament, which is related to the cost of their cloth. The editor predicts that in order to reduce inventory, if polyester manufacturers do not see major fluctuations in fundamentals, it will be difficult for the price of polyester filament to fall significantly during the period before this year, and it will most likely remain stable. There is an increase. Weaving companies can also purchase raw materials carefully according to their own needs. </p
