Business

Surprisingly Strong Polyester Market Buoyed By Massive Demand

In China, polyester performance was better than expectation in October, but concerns over November retreat retained. Nevertheless, with one week to go until December, market status fares way better than expected, as stock level is pegged low and some suppliers are even in debt, PFY remains profitable and prices are firm. Does this strength come after particular drivers or simply a prosperous cycle has finally arrived?

A rough estimation of polyester output is 3.2 million tons in November, which makes a year on year growth of slightly above 3% in 2016 possible, higher than previous anticipation. Questions were raised like where is production headed? Is it speculation or piled up in finished products form, or already consumed by end users?

According to CCFGroup sources, stock level in major weaving and knitting bases like Zhejiang and Jiangsu is lower than the 2015 level, except for Changxing fleece market, where inventory level is a bit high. Raw material stock build sustains around half month and scarce massive restocking activities were seen.

The 2016 polyester output was expected to record a 4% growth end 2015, which reduced slightly on annual basis. Yet looking at actual operation, polyester production growth rate curtailed as expected in 2016 but was at slower-than-expectation pace. Growth figure was revised down to below 2% mid-year as polyester output expanded merely 1% in the first half of 2016, plus, there was G20 concern in the second half year. G20 did see a spate of output reduction. however, June, July and post-G20 period have recovered the deficit through constantly high polymerisation rate, and production even exceeded expectation.

Looking back, the 3% growth rate is significantly lower than the 8% growth witnessed in 2015, and is lower than the 4% forecast made end 2015. It's rather the poor figure revealed in the first half year that has sharply dragged down players' expectation, which help sketch a false image of good demand at the moment. Short-term market volatility is a reflection of recent production condition and stock cycle change, while focus on longer term, demand itself will sustain its inherent trend.