Cash flow and inventory burden coexists in polyester market in May Triangle Polyester Fiber
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Cash flow and inventory burden coexists in polyester market in May Triangle Polyester Fiber

Views: 10     Author: Site Editor     Publish Time: 2019-05-13      Origin: Site

Cash flow and inventory burden coexists in polyester market in May
Polyester plants have sacrificed some profit in end-Apr to guarantee sales. Currently, POY and PET fiber chip plants are mainly around cost line, but FDY plants basically suffer losses, and profit of PSF and PET bottle chip plants has shrunk. If feedstock market remains firm in May, polyester plants may be hard to be profitable calculated on settlement price. With lackluster demand, the finished goods inventory pressure may be transmitted to polyester sector from downstream market.

Polymerization rate has started falling in May
In end-Apr, the polymerization rate was as high as around 94%, hitting 3-4 month high, but the run rate of downstream fabric manufacturing plants hit low in 3-4 months.

If the polymerization rate sustains high, the supply/demand contradiction pressure will continue transmitting to polyester sector. Polyester plants are expected to face intensified pressure in terms of inventory and cash flow.

As for cost side, external environment is supposed to be weak in short run. If feedstock cost side keeps strong, the profit is expected to squint toward upstream market, while the profit on polyester products is anticipated to narrow further.

PTA units change in Apr-Jun
Type Plant Capacity (kt) Location Operation change
Has resumed BP Zhuhai 1250 Zhuhai Started T/A on Mar 30 and resumed production during the May Day holiday
Hanbang 700 Jiangsu Jiangyin Shutdown on Apr 23 and resumed on Apr 27
Jiaxing PC 2200 Jiaxing, Zhejiang Started T/A on Apr 8 and restarted on Apr 27
To restart Yisheng Ningbo 2000 Zhejiang Ningbo To have T/A for 2 weeks from Apr 27
Luoyang PC 325 Luoyang, Henan To have T/A for 45 days from Apr 22
CAPCO 700 (6#) Gaoxiong To have T/A for 25 days from Apr 16
Hanwha 700 Daesan Began T/A from Apr 5 and to resume in early-Apr
To have T/A FCFC 1200 Zhejiang Ningbo Normal operation, to have T/A for 18 days from May 8
Jinshan PC 400 Shanghai Normal operation, to have T/A from May 24 to Jun 23

Polyester plants show higher intention to suspend or cut production with pressure from cash flow and inventory factor and high processing gap of spot PTA. Currently, the polymerization rate has started falling. Fujian Jinlun's 200KTA PSF capacity has started turnaround in end-Apr, and the resuming time is not confirmed; Shihua cut output by 230mt/day in end-Apr. Tiansheng’s 400KTA PFY unit has started turnaround on May 7, and Huahong has begun to scale down production by 500mt/day from May 7. One plant in Jiangyin with 200KTA of PSF capacity plans to start maintenance from May 9. Besides, some other plants intend to curtail or suspend production. One plant in Fujian with 600KTA of capacity plans to slash production by 30% in Jun, to shut down for around 25 days. One plant in Shaoxing with 1,200KTA of capacity intends to be offline for turnaround amid circuitry redesign for 1 month in Jun. In addition, some plants in Zhangjiagang, Shaoxing, Xiaoshan and Tongxiang also plan to scale down output, but the specific time and quantity is not confirmed.

The focus in May transfers to the impact of polymerization rate change to upstream supply and demand. Once polymerization rate declines, it will be bearish for upstream demand. Operating rate of PTA is supposed to rise in later period. Upstream and downstream market is anticipated to weaken together in May instead of strong upstream market but weak downstream industry before.