Summaries of on-site investigations of polyester and downstream industries

An-site investigation on polyester and its downstream industries, with the core summary as follows:

1. After digestion in March, the PFY stocks of downstream plants are nearly out of stock (raw material and finished product inventories are extremely low; finished product inventories from before the Spring Festival have been cleared, leaving only some high-priced finished products from after the festival). At the end of the month, downstream rigid demand stocking has started, with weekly sales ratio rebounding to around 60%; the operating rate of PFY plants is at 84% now, with a slight inventory accumulation. Downstream speculative sentiment is suppressed; if the war eases and prices fall, speculative demand will erupt, and the sales ratio of PFY may increase significantly.

2. The prices of order-based customers have kept up with the increase in PFY prices, but repeated Middle East tensions have caused customers to postpone orders. The price of grey fabric has not kept up (has increased by around 2,000yuan/mt but still 1,000 yuan/mt short); after the consumption of low-priced inventories, if raw material prices remain high, grey fabric prices are expected to rise passively.

3. In March, downstream DTY plants and fabric mills benefited from inventory appreciation and achieved good benefits; in the first half of April, losses occurred due to buying and producing on the spot, putting pressure on benefits; in the second half of April, with the passive increase in grey fabric prices, the losses may be moderately repaired.

4. Terminals and weaving factories are generally in a wait-and-see state for fear of falling oil prices and filament prices after the easing of Middle East tensions, with only urgent delivery and seasonal orders placed normally. Postponed orders must be placed by mid-May at the latest, and stocking for the second half of the year is also anticipated to start one after another, otherwise, delivery will be delayed due to bottlenecks in dyeing factories in the second half of year.

5. If PFY prices remain firm for another month, orders are expected to be placed, but inventory is likely to continue to accumulate, leading to greater pressure later. PFY enterprises may either promote sales at low prices (only transferring inventory and losing processing spread) or increase production cuts (more advantageous, as processing spread can cover the cost of production cuts).

6. The coordination among major PFY factories has gradually improved; at the end of last year, significant results were achieved by increasing production cuts to stimulate downstream purchases. Against the background of increasing inventory, major factories are likely to continue to increase production cuts to maintain processing spread (likely to maintain the spread near 500yuan/mt), and control inventory, rather than cutting prices to sacrifice processing spread. Attention should be paid to subsequent production cut actions.

7. No return of Southeast Asian orders has been felt so far, which needs continuous attention in the later period. If the Middle East war continues and energy tensions intensify, based on China's stable supply chain system, there is a logical possibility of Southeast Asian orders returning.

8. Optimistic view is still held toward the PFY market in the second half of the year: the demand in the second half of the year is significantly higher than that in the first half (fiber demand is prominent, and some customers feedback that the demand is 3 times that of the first half). This year, the supply side suffered great losses in the first half, and all links of the industrial chain did not dare to accumulate inventory easily due to the sharp fluctuation of high oil prices, with overall inventory (especially in the middle and downstream sectors) maintained at a low level. If the Middle East war eases by the end of the second quarter, there will be great room for imagination about the benefits of PFY in the peak season of the second half of the year.