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Insight | Time:Nov 15 2017 10:36AM
Polyester feedstock hike—dominating factor for polyester market
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In recent days, PTA futures has been hiking all the way. This was because on the one hand, increment of the long position of PTA1801 outnumbered that of short position, indicating a bullish market, and on the other hand, PX rose amid firm commodity market and PTA inventory is expected to decline in November and may even so in Dec despite of uncertainties. In the short run, PTA may still hike.

Downstream twisting and weaving sectors however began to weaken on slower end-users’ demand. Weaving and twisting plants found it unprofitable to restock for rigid demand while fabrics traders gradually turned negative in accepting a higher price. What’s more, except that from the water-jet looms in Changxing and warp knitting machines in Haining, sales of grey fabrics produced from water-jet looms in Wujiang and warp knitting machines in Changshu and circular looms in Xiaoshan and Shaoxing began to decline due to low season and price increase of orders. In the short run, such a weakness may persist. However, amid a long time away from the Lunar New Year and a certain period before inventory hike, downstream operating rate sustained high so that plants to sustain normal production had to restock, and the restock had to be carried out in advance to maintain profits. Thus though downstream plants worried about lower end-users’ demand, they were more concerned about sustained hike of PFY price given strengthened polyester feedstock. This is why most of them have now restocked feedstock for the production till end-Nov, while take a wait and see attitude towards the market in December.

For PFY market, the profit sustained high and inventory very low. And most plants increased prices amid higher feedstock and sales kept good thanks to rigid demand of downstream plants. 

On the whole, despite that end-users’ demand started going lower, the spike of polyester feedstock gave a big boost for polyester market. Downstream plants, running at a high rate, were still negatively driven to replenish for rigid demand and polyester plants remained out of supply, smoothly transferring cost hike to their downstream buyers. In the short run, such a trend may persist with PFY price still increasing and downstream plants having no choice but to accept the hike. However, as end-users’ demand is to weaken on low season, downstream plants are facing increasing pressure, though there is still some time to go before their run rate falling and impacting rigid demand of polyester sector. 
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