More polyester plants to start cutting output amid muted sales

The elasticity of polymerization rate started enlarging since the second half of 2018. Polyester plants showed stronger risk-aversion awareness when end-user demand weakened and PTA market was firm. The polymerization rate declined by 6% in May, 2019, covering 3.36 million tons of capacity, and the reason was similar to that in Aug-Sep, 2018 with high PTA-PX spread and mounting stocks of polyester goods. The devaluation risk of high stocks was expected to increase. More polyester plants that did not possess PTA capacity cried for output cut.

Entering Jul, after a round of PTA upsurge, polyester market encountered the same problem. Although PTA futures slipped rapidly, the decrement of spot PTA only dipped by around 200yuan/mt. Some PTA units intended to have turnaround, spot supply was tight, and stocks are expected to decline; thus, PTA price still enjoys support in short run. Meanwhile, sales of PFY have started falling apparently since last Monday, with sales ratio mainly around 10-20% in the second half of last week, resulting into rapidly mounting stocks of finished goods and further dragging down price. PFY plants witnessed shrinking cash flow. The high stocks of polyester products are expected to face higher risk to devaluate. Polyester plants started calling for production curtailment again. By now, only some PFT bottle chip, PET fiber chip, and polyester filament yarn plants have started maintenance, such as China Resources, Far Eastern, Tiansheng and Xinfengming etc., involving around 990kt of capacity.