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Insight | Time: Sep 13 2018 10:23AM
Polyester downstream market: strong looking-on mindset with lower run rate
 
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Operation of textile mills
Markets  Status quo
Changshu DTY warp knitting circular knitting Operating rate of warp knitting moved down to 60% while that of DTY was around 80% with weak sales. Although pressure of grey fabric inventory kept moderate, mills stopped production due to the expectation of depreciation and slow delivery of coral velvet and flannel. Sales of polar fleece was weak and operating rate of pile was around 50%. Plush fabric took a turn for the better and operating rate of double facer knitting machines was around 80%-90%.
Taicang DTY Water-jet Water-jet loom kept running, while the fabrics were undersold and mills mainly kept sidelined after prepared feedstock earlier. DTY mils mainly halted production and inventory accumulated fast. Operating rate was around 80%. Mills gradually consumed inventory purchased before.
Wujiang Water-jet Water-jet weavers stopped production every four days and operating rate kept around 70%-80%. Sales of grey fabric kept moderate and prices of some mills with high inventory sank somewhat. Halting productions was limited in low inventory.
Changxing DTY Water-jet Operating rate of water-jet loom was around 50% and that of DTY was at 50%-60%. Productions recovered slowly after energy-saving, emission-reduction and rations. After price of brushed fabric moved up, downstream fabric traders kept sidelined. Inventory of fabric moved up, especially twill fabric. End users now had inventory of yarn and fabric, thus buyers got an intense intention of keeping wait-and-see. Inventory of fibers was around 10 day and that of twill fabric was around 15 days. Inventory of plain fabric was at low level and fluctuated in a week.
Haining warp knitting Inventory pressure of spandex in warp knitting was obvious and sales were hard to move. Overall operating rate of warp knitting moved down to 70%-80%. There were less room for further discussion in new orders and weak buying idea of weavers. Mills mainly consumed inventory.
Xiaoshan and Shaoxing DTY Circular knitting
Now orders kept plain despite large orders on Double 11 in past years. Operating rate of circular knitting and DTY respectively moved down to 50%-60% and 70%-80%. Downstream demand went weak while POY kept firm at high level. Traders suffered larger losses.
Cixi DTY Sales were hard to move. Operating rate of DTY moved down to 50%, and POY mills consumed inventory and intend to halt productions later.



Sales of grey fabric did not kept weak in lull season boosted by rising cost. Demand for some products emerged and inventory moved down somewhat in Aug.

Grey fabric was a drug on the weaving market as sales tended to become stable. Inventory of downstream mills increased, sales of medium-and-small-scale DTY mills were under pressure and inventory accumulated, similar to direct-spun filament.

But pre-sales of grey fabric did not mean that the demand has already been completed for peak season. Many orders of downstream mills are not expected to move. Wait-and-see price was the main reason for weak sales of grey fabric.


Sales ratio of PFY plants has weakened for 13 days when downstream buyers focused on lowering feedstock inventory at hand, cautious in replenishing at high price. Feedstock inventory in downstream plants was mainly around 10-20 days, lower at 5-10 days and higher at 20-30 days. 

Inventory of PFY accumulated rapidly with continuous bleak sales, which was a crucial factor that some PFY plants started suspending or curtailing production in recent days.



Operating rate of downstream market declined further. On one hand, sales have apparently diminished and sales were slow in fabric plants and twisting units; on the other hand, some small and medium-sized DTY plants and grey fabric manufacturers were under cash flow loss. In short run, downstream plants that are still producing may focus on consuming earlier feedstock inventory, and may choose to suspend production temporarily if appropriate processing fee and sales fail to appear after feedstock inventory being used up, not ruling out the production suspension in a large range during Mid-Autumn Festival and National Day holiday.

Downstream plants are expected to present low production activity based on current price under losses. For downstream plants with feedstock (PFY), and finished goods inventory (grey fabric and DTY), the cost and risk of short-term shutdown is expected to be low. Thus, if cost maintains current high, increasing downstream units are of great possibility to stop production after feedstock inventory declined. Sales of PFY are anticipated to face bigger pressure and may keep dull when most downstream plants mainly lower earlier feedstock inventory now.


How to stimulate downstream plants’ production activity? The premise is to guarantee the production spread above the cost line. To realize this presupposition, apparel plants need to accept price uplift of the fabric, or the PFY plants and its upstream market are willing to discount. In short run, overall market is a game between the upstream and downstream. The operating rate and inventory change of downstream plants in later period should be noted.
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