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Insight | Time: Aug 2 2019 3:04PM
Polyester yarn market stays in "winter" in such a hot summer
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The sluggish end-user demand and large fluctuation of polyester feedstock put forward unprecedented challenges to polyester yarn mills. In terms of the raw material, direct-spun PSF experienced sharp ups and downs in the first half of 2019 and the market situation changed repeatedly. The price once broke through 2017’s low, and then rebounded quickly, but retreated again subsequently. It is rare to see in previous years. Both direct-spun PSF plants and spinners make efforts to survive amid the severe fluctuation. Based on the surges and slumps in last Aug, the selling prices of spinners are adjusted rapidly.

Polyester yarn price trend keeps consistent with that of direct-spun PSF from the chart below. In a period, the cash flow of polyester yarn plummeted driven by the frequent change of direct-spun PSF and once moved to negative side. At that time, it would be chronic death for the spinners who did not adjust price. Sales of polyester yarn started to slide from Apr, mostly affected by the decline of consumption and China-US trade war this year. From Apr to date, sales of polyester yarn mills have been stagnated, bringing enormous challenge to the restocking and sales operation of the spinners. Many spinners reported obvious impacts on normal operation, especially small and medium-sized ones.

Small and medium spinners cut or suspend production at a large scale mainly due to the decline of overall demand. A large amount of cargos encounter poor sales and high inventory results in rising pressure on cash flow. Adding the volatile raw material, the spinners which cannot bear high risks will suffer. It is partly seen in Shandong, Hebei, Jiangsu and Zhejiang. Looking the operating rate, it recovered much after a short decline in Jun, but moved down quickly in Jul and recorded low since 2016. It is partly due to high-temperature and electricity restriction in North China, but more is due to the negative market.

Weaving sector also stays in cold territory. The operating rate remains sluggish and the impacts of weak demand pass into upstream continuously. For spinners, the large-scale production cut and unprecedented price competition are about to appear this year. Some capacity may be eliminated gradually.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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