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Insight | Time:Dec 22 2016 4:21PM
Impact of heavy smog in North China on textile industry
 
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China has been experiencing the worst smog of the year for the past few days and more than 70 cities have declared either red or orange alerts for air pollution according to China's Ministry of Environmental Protection. Severe smog in northern China has caused schools to close and hundreds of flights to be canceled. About 1,767 factories in Shandong were asked to close temporarily and 1,399 companies were required to limit production amid heavy smog pollution. Hebei province issued Hebei Province Heavy Pollution Weather Emergency Plan in early December, strictly controlling the emission of industrial pollutant. All large-sized plants involved boiler fueled by coal in Shijiazhuang was required to shut down temporarily, and policies in Baoding, Xingtai and Handan and so on were similar. As for textile mills, the impacted is listed as below.

Impact of heavy smog in North China on textile industry
Product Impact Specific situations
Hebei Shandong Henan
MEG Small Small Small Some coal-based MEG plant was closed
Cotton Big Small Small Heavy smog influences the transportation in Shandong, Hebei and Henan and cotton procurement and sales are affected.
PSF Big Small Small Most recycled polyester fiber plants in Hebei had to shut down since mid-November when local government began to tackle air pollution problems. These plants’ capacity totals around 0.5million mt/yr, about 50% of the total recycled polyester fiber capacity in China. As a result of the decreasing re-PSF supply, virgin PSF price in Jiangsu increased amid good sales.
VSF Big Small Small All medium and large sized viscose plants have been closed for smog with capacity totaled 170kt/year. The others were asked to lower operating rate. The supply was a little tight due to delays in transportation. Coupled with the speculation on maintenance of some units, the actual impact was enlarged.
CPL Big Big Tiny CPL units are influenced by environmental protection evidently in Hebei, and the operation rate of Risun’s CPL unit may reduce to 50% by the end of December. For areas in Shandong, there is little influence on units in Zibo and Liaocheng, but units in Heze are influenced evidently. Fangming Chemical has stopped its adipic acid unit, while the operation rate of its CPL unit has dropped to 60%. Besides, transportation has also been influenced largely as highways are closed due to the haze. Benzene enterprises were influenced limitedly, and CPL enterprises were influenced slightly, with no influence on chip enterprises.
PFY Tiny Tiny Tiny No polyester filament yarn plants are located in Shandong, Hebei and Henan.
Spinning Big Small Small Spinning sector has no pollution, but yarn sales are restricted as downstream weaving, printing and dyeing is affected in Hebei, Shandong and Henan. Some spinners are forced to reduce output or even shut down temporarily, leading to lower operating rate. Spinners in Hebei are affected the most significantly.
Weaving Big Tiny Tiny Haze poses large impact on the weaving sector in Hebei, leading to lower operating rate and higher warp sizing costs. In Shijiazhuang and Baoding, many plants are closed, while in Shandong and Henan, the plants affected are limited. Some weavers in Hebei turn the warp-sizing to Shandong and Henan.
Printing & dyeing Big Big Big Printing and dyeing sector in Hebei is influenced the most and many plants are shut down temporarily and dyeing costs rise by 0.20-0.30yuan/m. Plants in Shandong and Henan are also affected. On Nov 17, Hebei took specific actions to crack down illegal environmental pollution, involving Shijiazhuang, Baoding, Cangzhou, Hengshui, Dingzhou and Xinji. The remediation on printing and dyeing sector will last to Dec 31, 2016.


Impact on polyester staple fiber market
1. Supply
Tianjin Petrochemical and Shandong Wanjie, totaling 4% of domestic virgin PSF capacity, sustain their operating rate despite the government’s air pollution campaign. However, most recycled polyester fiber plants in Hebei had to shut down since mid-November when local government began to tackle air pollution problems. These plants’ capacity totals around 500kt/year, about 5% of the total recycled polyester fiber capacity in China. As a result of the decreasing re-PSF supply, virgin PSF price in Jiangsu increased amid good sales.

2. Demand
Polyester yarn production are free from the strengthened environmental protection policy as they seldom use coal. Plants in Hebei sustains their operating rate at around 50-70%. However, these plants’ sales suffered a setback as many warp sizing plants were shut down. The inventory of some yarn plants increases by 5-7 days, yet those whose customers are mainly in the South witness no inventory pick-up.


3. Price
The air pollution campaign actually exert very limited influence on PSF price as neither virgin PSF nor re-PSF can dominate domestic PSF price trend. Virgin PSF price surged since December propelled by soaring polyester feedstock though in Hebei and Shandong fierce competition set an obstacle to its hike. Recycled polyester fiber price hike was driven by rising feedstock price and virgin PSF price rise. And of course the slump of recycled polyester fiber supply in Hebei boosted to some extent the product’s sales in Jiangsu. 

Impact on spinning and weaving market
The smog pollution is very heavy in North China like Shandong and Hebei, and to mitigate such situation, many warp sizing plants and printing and dyeing plants are required to shut down temporarily as many of these plants are fueled by coal which will discharge waste gas to the air and further cause air pollution. Affected by these, sales of yarn and grey fabric are impacted as warp sizing plants and printing and dyeing plants are their downstream sector, and many spinners and weavers are forced to suspend production with poor demand. Actually, government has intensified environmental protection from around mid-November when the heat supply starts in North China under low temperature.

Besides, some factories that are fueled by natural gas are also required to limit production as government limits electricity supply. Intensified requirement on environmental protection is expected to continue at least into the end of December. Most factories are not expected to maintain production in January with the coming of Spring Festival holiday. By the way, due to environmental protection issue in Hebei, part of weaving plants turns the warp sizing, printing and dyeing operation to Shandong, so the costs are heard to increase by nearly 30%.

Related articles
1. Influence of many recycled polyester fiber plants' shut-down in Hebei on the market

2. Many weavers and spinners forced to limit or suspend production amid smog

3. Some North China cotton mills suspend production amid heavy smog

4. CPL plant operation lowers under envrironmental protection pressure

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