This week, the polyester market mainly revolved around two core questions: "How much further can costs rise? How much will the concentrated production cuts by the three major polyester filament manufacturers affect polyester production capacity?"
Last Friday, the three major polyester filament manufacturers officially announced their production reduction plans: "The plan is to implement self-disciplined production cuts to maintain prices, with POY production starting at 10% and FDY production continuing at 15%, with further expansion of production cuts based on the timing of the Spring Festival, and weekly supervision and inspections during this period." This Wednesday, the production cuts and shutdowns were largely implemented, and the three manufacturers arranged a "Joint Inspection Itinerary for Polyester Filament Production Cuts," with seven inspection teams conducting inspections of the spinning lines reported by the three manufacturers as having reduced production.
The total production cuts inspected by the three major polyester filament manufacturers are estimated at around 2.494 million tons, including 1.61 million tons of POY and 883,000 tons of FDY. Of course, this portion of the production cuts represents the total amount of existing production cuts that the factories are currently operating but not yet running, including spinning lines that have been allocated but not yet started during the commissioning of new units, as well as those that were shut down earlier.
As of Thursday, the CCF-calculated overall polyester operating rate decreased to 89.7% from 91.1% last Friday. This decline is partly due to the fact that some polymerization processes at the three major filament mills have not yet fully recovered from the production cuts, resulting in a time lag and output difference.
Based on current plans by filament mills, the polyester operating rate for January and February is estimated to be around 88-89% and 83-84% respectively. If other filament, staple fiber, and PET chip mills implement unexpected production cuts or shutdowns, the operating rate may decline further.
Recently, oil prices have been at relatively low historical levels, with WTI crude oil futures fluctuating below $58.5. MEG, one of the two major raw materials for polyester, remains at relatively low historical levels; however, with the rapid rise in PX prices, PXN has expanded to above $360, and the spot price of another major raw material, PTA, has risen to around 5050 yuan/ton. The total polymerization melt cost has risen to around 5530 yuan/ton.
Therefore, current prices for major polyester products are relatively high compared to oil prices, but relatively low compared to polymerization costs, resulting in a lack of profitability for most varieties.
Polyester filament saw concentrated maintenance and production cuts in January and February. Besides the weak cash flow pressure due to high costs, there was also the pressure of post-Chinese New Year inventory buildup. Currently, polyester filament factories have extremely low equity inventories, with some varieties even requiring order backlogs. However, overall inventory pressure remains high, and the Chinese New Year holiday will likely lead to a gap in polyester filament shipments due to concentrated shutdowns in downstream texturing and weaving industries. To reduce post-Chinese New Year inventory pressure, it is appropriate for polyester filament factories to follow the current trend of reducing production in texturing and weaving.
Downstream texturing, weaving, and dyeing industries have been gradually reducing production in December. In Jiangsu and Zhejiang provinces, the production rates for texturing, weaving, and dyeing have decreased from 86%, 71%, and 75% at the beginning of December to the current 79%, 62%, and 70%, respectively.
