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Insight | Time:Sep 28 2017 3:54PM
Gauge polyester industry demand resurrection via spinning industries compare
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Polyester demand has been continually robust and outpaced market expectation in 2017, boosted by speculative demand or full recovery in entity economy?

First, let’s take a look at the fiber industry. We horizontally compared several indexes for the first three quarters of recent two years.

Operating rate
    Polyester filament yarn Nylon 6 textile filament Spandex Cotton yarn Rayon yarn Polyester yarn
2017 Q1 21% 19% 7% 19% 10% 9%
  Q2 3% -11% 0% 3% -1% -2%
  Q3 16% 14% -2% 4% -1% -2%
2017 Q 1-3 13% 6% 2% 8% 2% 1%

(Note: all percentage point in above figure represents y-o-y growth)

2017 O/R level is generally higher than that in past year looking at Q1-Q3 overall condition, with PFY, NFY and cotton yarn seeing particularly evident increase. Quarterly market trend is convergent. But in Q3, spandex, rayon yarn and cotton yarn running rate lowered comparing with a year earlier level.

    Polyester POY Polyester FDY Nylon 6 textile filament Spandex Cotton yarn Rayon yarn Polyester yarn
2017 Q1 1% 20% -34% -68% -27% -40% 81%
  Q2 -14% -20% -27% -50% 45% 35% 4%
  Q3 -50% -39% -50% -5% 23% 22% -1%
2017 Q 1-3 -20% -12% -37% -46% 8% 3% 25%

If group PFY, NFY and spandex into PFY, cotton yarn, rayon yarn and polyester cotton yarn into yarn, we can see entirely different condition. PFY products stock level is obviously lower than the same period in 2016 while situation is reverse for yarn.

Cash flow
    Polyester POY150/48 Polyester FDY150/96 Polyester DTY150/48 Nylon FDY70/24 Spandex 40D Cotton yarn CYC32 Rayon yarn CYR30 Polyester yarn CYT32
2017 Q1 364 224 300 308 143 717 -705 151
  Q2 543 244 125 687 560 403 -410 -319
  Q3 193 89 -90 1444 -100 -313 11 -523
2017 Q 1-3 366 186 112 813 201 269 -368 -230

PFY products cash flow improved as a whole in Q1-Q3 2017, among which, DTY cash flow was worse than 2016 figure. In yarn sector, rayon and polyester yarn profit both registered y-o-y reduction, and cotton yarn margin also decreased in Q3 comparing with 2016 level.

Conclude from above comparison, spinning industry is not entirely powerful all the time but shows divergence between yarn and filament markets.

PFY products are stronger than yarn market, reflected in both profit and fundamental, but O/R of all products is higher than 2016 level.

Yarn market alteration is relative more in sync with seasonal demand change.

We think the divergence to some extent reflects the transform of commodity feature: the great commodity bull in 2016 make most products fluctuate in line; supply side reform in 2017 however, simply put, sends industrial products to be stronger than agricultural ones. Detailed speaking, black sector outperforms chemical sector, followed by agricultural products and other sections.

ZCE cotton generally maintains range bound in 2017, whose guidance on the industry is less powerful than energy and chemical sector. Viscose also walks independently based more on its fundamental features. Contrast with yarn products, signs seem to be captured that capital is impacting on PFY products demand. Some believe that current polyester demand is obviously buoyed by the industry’s cyclical rise, which then make them be prudent toward the market outlook.

With time passing by, how much longer will the cyclical rise sustain and how much force it can render to boost market demand is uncertain. Its impact on players’ attitude might be great.

More info, please refer to 5th International PET Industry Forum (Oct 18-19, 2017)

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