Whether the peak season of polyester "Golden September and Silver October" will come as scheduled remains to be verified
2023/7/25
Unexpectedly, this off-season is a bit "busy"
Talking about the changes in the polyester market this year, "booming production and sales" exceeded expectations is the most common feeling among industrial enterprises. The reporter learned that, especially on June 14, the production and sales volume of polyester increased, and the production and sales volume reached more than 400% on that day, setting a new high for this year.
"This off-season is indeed somewhat unusual." A relevant person in charge of a polyester company in Jinjiang said in an interview that since May, the operating rate of the polyester industry has continued to rise, reaching 93% in June, the highest level of the year, and currently operating at a high level of more than 90%.
In this regard, Liu Siqi, an analyst at Zijin Tianfeng Futures, said that June to July is the traditional off-season for the polyester market, but this year not only new facilities have been put into operation one after another, but the new production capacity in the first half of the year has exceeded 5 million tons, and the operating rate has stabilized at 93%-94% with low inventory and acceptable cash flow, reaching the high load only seen in peak seasons in previous years. These performances far exceeded market expectations.
According to the personages of the interviewed enterprises, since late June, considering that the price of polyester has been at a low level in the year and the supply of some specifications of polyester filament is tight, downstream weaving companies are worried about rising raw material prices when the demand comes. Some warp knitting and water jet factories are preparing for winter fabrics in the second half.
Similarly, the operating rate of downstream weaving has been generally low since the second half of last year, and the performance of the demand side has been mediocre. Factories have controlled cost inventory and raw material inventory to avoid operating risks. Although July is the traditional off-season, in order to protect workers and regular customers, they still produce, but the operating rate is low. Under the support of the weak demand side and low raw material inventory, the polyester market showed a trend of "not weak in the off-season".
It is understood that under the background of the sharp rise in the price of the raw material PTA in the early stage, the sentiment of the polyester market has improved, but the polyester factory has not followed the increase in quotations, but has implemented multiple rounds of profit-sharing promotions. Therefore, at the point in time when the downstream concentrated inventory replenishment, there was an overall increase in production and sales.
In fact, price reduction promotions are more common in the polyester market, especially in the off-season. Relying on the method of exchanging price for quantity to ensure the inventory of polyester factories is more "healthy".
"Profit-sharing promotions in polyester factories lead to increased production and sales. Usually, factories carry out promotional activities at an indeterminate time after a large accumulation of finished products in order to achieve the purpose of reducing inventory and continuing production." Qiu Qianqian, an analyst at Jinlianchuang Chemical, told reporters that from the perspective of the industrial terminal weaving market, there are stages in the downstream stocking, and the promotion cycle of polyester yarns often matches the stocking cycle of terminal weaving raw materials. When there is a rigid stocking demand for raw materials in terminal weaving, polyester factories generally choose to cut prices for promotion, or when raw material prices rise, they choose to maintain the original price of polyester filaments, and transfer profits to downstream in two ways.
During the visit, the reporter also learned that most of the price cuts and promotions of polyester are focused on polyester filaments. The main reason is that the price of raw materials dropped rapidly in the early stage, and the production and sales of the month were not balanced. In order to stimulate production and sales and control inventory, the factory took the initiative to cut prices and promote sales. Usually, the result of price reduction and promotion is a sharp recovery in market trading, explosive growth in factory orders, and a significant decline in equity inventory levels.
In the opinion of many interviewees, this year's polyester and downstream operations have shown obvious resilience. "The current stable operation of enterprises is an important reason for the steady start of construction in the off-season. That is to say, the industry chain as a whole is in a relatively virtuous cycle of exchanging prices for volume." The interviewed enterprises said.
Taking the initiative to go to the warehouse, the polyester factory "travels lightly"
It is worth mentioning that this year, the operating rate of the polyester industry continues to be high, while the inventory of enterprises has decreased year-on-year, and polyester factories are "packing lightly". Taking polyester filament as an example, the inventory of enterprises has continued to decline since the end of March, and it is currently around 20 days, which is at a low level this year. Compared with the same period last year, the decrease was about 52.7%.
According to the reporter's understanding, in the fourth quarter of last year, under the double influence of repeated epidemics and weakening external demand, the operating load of polyester factories was much lower than that of the same period in previous years, which allowed the inventory to be eliminated.
"Due to poor operating efficiency in the second half of last year, the polyester factory as a whole was in a state of high inventory." Li Mengting, manager of the polyester department of Wuchan Zhongda Chemical Group, said that it was very passive for the factory to remove the inventory. In the face of high inventory, only price reductions can overcome the difficulties, and the downstream is also counting on the promotion of polyester to replenish the inventory.
In her opinion, in fact, since the second half of last year, polyester factories have actively destocked through multiple rounds of measures in the face of passive stockpiling. After April this year, the inventory pressure of polyester factories has eased, and the industry has returned to a more "comfortable" state, and even slicing is profitable.
"Accordingly speaking, the slicing process is the simplest and should not have sustained and relatively good profits. However, we can see from the profit of slicing that the downstream market is not as bad as imagined, but the profits of all links in the industry have become thinner." Li Mengting said that the life of the polyester factory is much better than last year. Just looking at the cash flow of the day can reflect that the factory has recovered a lot.
"The reason why the market is 'not slow in the off-season' this year is that after the large-scale removal of polyester factories at the beginning of the year, the pressure on the inventory of finished products has been reduced, and the cash flow has also been greatly eased." Feng Xiaofen, a polyester researcher at Founder Mid-term Futures, said that from November to the Spring Festival last year, affected by repeated epidemics and the off-season of the Spring Festival, the operating rate of the polyester industry dropped sharply to a historically low level in advance, and factory inventories were digested. After the intensive maintenance of the equipment in April-May this year, the cash flow of most polyester products has been significantly restored to a small profit status, which has increased the willingness of polyester factories to maintain a high operating rate to a certain extent.
The reporter found from the semi-annual performance forecast announced recently that the operating conditions of many polyester companies have improved significantly in the second quarter. On July 14, Hengli Petrochemical released the 2023 semi-annual performance forecast. The net profit attributable to shareholders of listed companies in the first half of the year was approximately 3.05 billion yuan, a year-on-year decrease of approximately 62.00%; the net profit after deducting non-recurring gains and losses was approximately 2.28 billion yuan, a year-on-year decrease of approximately 69.00%.
According to Hengli Petrochemical, due to the intertwined drive and influence of domestic and foreign macro factors such as deepening geopolitical influences and intensified trade frictions, market demand recovery is slow, and the price difference and profitability of the company's main chemical products have narrowed significantly. The traditional demand for major products such as chemicals, functional films, civil yarns, and industrial yarns related to terminal consumption and infrastructure real estate is at a low market level, resulting in a year-on-year decline in the company's profits. However, under the joint effect of the release of backlog demand in the early stage, economic policy support and low base effect, the single-quarter profit in the second quarter is expected to be 2.03 billion yuan, and the company's profit has improved significantly from the previous quarter.
On the same day, Hengyi Petrochemical also issued a semi-annual performance forecast for 2023. The company's net profit attributable to shareholders of listed companies was 60 million to 80 million yuan. The specific reasons are as follows: During the reporting period, with the moderate recovery of the domestic and international macroeconomics, the company's refining and downstream terminal consumer demand in the polyester sector slowly recovered from the previous month. The operating rate of the polyester industry continued to increase. The company will actively seize favorable opportunities in the market to improve the efficiency of production and operation, and then promote the continuous improvement of the price difference of various products. Hengyi Petrochemical stated that as of the disclosure date of this report, the production and sales of the company's and downstream products are smooth, the company's product inventories are at a low level, the cash flow generated by operating activities is stable and sufficient, and downstream demand is recovering and improving month by month. The company will adhere to the strategic focus, seize the opportunity of recovery, and realize the improvement of operating efficiency.
Confidence recovers, exports become a new growth point
In fact, during this visit, many enterprises reported that the polyester market is gradually recovering, and the industry's mentality is improving. The current factory production is active, and maintaining a high operating rate reflects the positive market expectations to a certain extent. In their view, the obvious destocking in the polyester market is due to the influence of the supply side on the one hand, and the joint efforts of domestic and external demand on the other hand.
According to Zhu Yaqiong, an analyst at Longzhong Information, since the second half of last year, the capacity utilization rate of polyester filament manufacturers has been low, and the capacity utilization rate at the beginning of the year was only 60-70%, slightly lower than the same period last year. Although the new production capacity of polyester filaments has increased by more than 3 million tons so far, the load of newly put into operation has increased relatively slowly, making the output of polyester filaments in the first half of the year basically the same as that of the same period last year.
From the perspective of the demand side, the demand of the polyester industry improved in the second quarter, the domestic demand performance was stable, the export continued to improve, the terminal continued to replenish the inventory in stages, and the days of finished product inventory in polyester factories showed a gradual decline.
"Domestic downstream replenishment is the main reason for the decline in polyester filament inventory." Ma Qi, a chemical fiber analyst at Longzhong Information, said that during the year, the finished product inventory of terminal weaving factories was further transferred to downstream cloth merchants, making the finished product inventory of weaving factories relatively stable. The periodic replenishment of raw materials keeps the stock of raw materials in weaving factories at a relatively stable level.
"Export of foreign demand is a new demand growth point for the polyester industry." According to Xi Jun, the current head of the polyester industry at Hangshi Chemical, the downstream terminal production capacity of polyester in overseas markets is also gradually expanding. As the largest downstream of polyester, the output of polyester filament yarn in the first half of the year was basically the same as that of the same period last year, but the export volume increased by more than 30% from January to May, and the export volume of polyester staple fiber and polyester bottle flakes also increased significantly. The export level of the overall polyester industry has shifted from finished products to upstream raw materials, especially semi-finished products. The export situation is better, which has a certain boost to demand.
"From the demand side, under the environment of increasing risk of global economic recession, overseas orders have shrunk year-on-year, and some orders have been transferred to Southeast Asia and other regions. However, since Southeast Asia does not have polyester equipment, it still needs to import a large amount of raw materials from China." Zhu Yaqiong said that from January to May this year, the export of polyester filament yarn was 1.7207 million tons, a year-on-year increase of 31%. And in the second quarter, with the help of the cost side, the downstream textile industry's buying sentiment was high, and the warehouse was moderately replenished several times. The inventory of polyester products led by polyester filament was mostly transferred to the downstream link, and the overall inventory of the industry was at a low level.
The reporter learned that with the partial transfer of the weaving industry to Vietnam, India and other countries, this year's polyester exports have increased significantly compared with previous years, and with the acceleration of export demand, part of the increase in polyester has been absorbed.
In this regard, Liu Siqi said that part of the weaving production capacity has been transferred to Southeast Asia, and the export products of the domestic textile chain have gradually shifted from clothing to upstream gray fabrics and polyester filaments. The export volume of polyester has continued to increase in the past two years. In addition, due to concerns that the BIS certification of domestic polyester filament exports to India will expire in June, there are signs of "exportation" in part of the demand, which further increases the export volume of polyester.
"Polyester and downstream operations are stable, which is conducive to supporting demand expectations and market confidence. However, the operating rate of polyester is already at a high level, and there is no shortage of raw materials for the time being. The market still holds a certain cautious view." Interviewees said that in the short term, there is a possibility of a smooth transition in the off-season of the polyester market, and the long-term healthy development depends on the fulfillment of actual demand.
In Liu Siqi's view, the current industrial chain maintains a high operating rate, and each link has certain accumulation expectations. "If the internal and external demand of the terminal falls short of expectations in the second half of the year, then the cumulative inventory will increase, and the inventory pressure will drive the reduction of weaving, and the polyester industry may experience negative feedback." She said.
In the second half of the year, the "expected difference" may still appear
The "low peak season" in the first half of this year was a big blow to the polyester industry. From March to April, many viscose staple fiber companies were forced to cut prices to ship goods, and the trend of "poor expectations" was still fresh in the memory of industry insiders. Right now, it is the traditional off-season of the industry, but both inventory and sales are much better than expected, and this also makes industry people have certain guesses about the "expected poor" trend in the second half of the year.
During this visit, the reporter learned that although the current polyester market presents the characteristics of "the off-season is not slow", there are big differences compared with previous years: although the volume has increased this year, the price increase is limited, and corporate profits are not high.
In this regard, Xi Jun, the current person in charge of the polyester phase of Hangshi Chemical Industry Co., Ltd., explained that from the perspective of research, the polyester market this year is different from previous years. First, some changes have taken place in the marketing model. In recent years, especially in the past two years, e-commerce live streaming has developed rapidly, and downstream sales have increased rapidly. In the past, it was sold layer by layer through wholesalers, and middlemen had to earn part of the price difference. After the rise of live broadcasting, the "price war" among e-commerce companies has become more and more intense, which has resulted in the phenomenon of "increasing sales but not increasing prices". Second, whether it is polyester, PTA, or PX, from last year to this year, they are all in the process of expanding production capacity. Especially this year, the polyester industry has increased a lot of production capacity. "Downstream texturing and weaving capacity expansion have resulted in overall sales in the market, but the price cannot go up, which ultimately leads to meager profits in the polyester industry chain as a whole." Xi Jun said.
"In the first half of the year, the market generally expected that prices would resume their upward trend after the epidemic. However, due to the weak global macro economy and slow replenishment at home and abroad, the price increase fell short of expectations." Yuan Wei, an analyst at Shenwan Futures, said that the "poor expectations" in the second half of the year focused on whether the peak season was booming or not.
During the visit, the reporter found that the current market views on polyester "Golden Nine Silver Ten" are quite different.
Some interviewees believe that consumption downgrading and textile homogenization have seriously promoted the transfer of the textile industry to Southeast Asia, and international trade barriers have strongly suppressed overseas textile orders. In the second half of the year, the domestic textile industry will inevitably continue to face the above problems. In addition, the price instability of textile raw materials has also led to sluggish domestic and foreign orders.
"From the perspective of cautious sentiment, the possible situation in the second half of the year is: new orders are distributed and delivered, and it is difficult to achieve an 'overnight improvement' or a concentrated order rush. From the current point of view, textile factories are more active in building inventories, and orders for autumn and winter have been scattered sporadically. The pre-demand determines that the improvement of the 'Golden September and Silver October' is limited." Interviewed industry sources said.
At the same time, there are positive voices in the market. For example, a factory mainly engaged in domestic trade is relatively optimistic about this year's market. It believes that since the optimization and adjustment of the domestic epidemic prevention and control policy, the "internal circulation" has continued to exert force, and the domestic textile and clothing consumption data is improving. In addition, judging from the research data of Longzhong Information, the inventory of gray fabrics in weaving factories is within a reasonable and controllable range for the past five years, and there is no drag on the market in the second half of the year.
"The market still has certain expectations for the 'Golden September and Silver October', but the current pressure is mainly concentrated on the weaving link, and we need to pay attention to whether the terminal orders in the later period can be significantly improved." Feng Xiaofen, a polyester researcher at Founder Mid-term Futures, said that if the order improvement is not obvious, then with the accumulation of gray fabric inventory, negative feedback may be formed to the upstream of the industrial chain.
In Yuan Wei's view, the current polyester market has formed an optimistic expectation of overseas storage. However, considering the slow recovery of overseas demand, the polyester market will still experience "poor expectations" in the second half of the year. The quality of "Golden Nine and Silver Ten" needs to be verified by waiting time.
During the investigation, the reporter learned that in the past two years, the boundary between low and peak seasons in the polyester industry has become blurred, and downstream will also take the initiative to replenish goods when prices are low. At present, the middle and lower reaches of the industrial chain have stocking behaviors. Whether the "off-season is not short" will overdraw demand depends on whether the performance of terminal orders this year exceeds expectations. If the order performance is average, the terminal demand is insufficient, and the early stocking is difficult to fully digest, there may be a situation of "not busy in the peak season", which will eventually cause the terminal to passively reduce its load.
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