PFY is Still Bearish in the Medium Term

The price of polyester yarn begins to stop falling and falls back since last weekend, the main reason is that the price of raw material in upstream rebounds and the cost pulls up. The price of polyester feedstock like PTA spot goods, MEG and chips increased slightly after the international crude oil and PTA futures bounced back in succession. However, there was large decline of polyester products in previous period, some specifications of the polyester products were at a loss and the marketers also had been wondering the bottom of the drop.

Will the polyester yarn market keep rebounding? Let’s analyze from the following aspects:

Firstly, no matter for the water-jet machine, warp knitting machine or circular machine, the operating rate is low in the downstream weaving market, many weaving manufacturers are faced with great pressure and tighter capital. According to the recent investigation from our website, the inventories of nearly 80% of the weaving manufacturers are beyond 35 days, and the current inventories of weaving manufacturers are about 51 days from the monitor of Chinese Department of Commerce-Shengze Silk Chemical Fiber Index. In addition, the textile market has entered into the traditional slack season in June, demand would be weakened further and the inventory pressure certainly would continue to rise. At present, many weaving factories show that they are likely to reduce the operating rates. Therefore, the downward trend of the downstream rigid demand will be difficult to change in a short term.

Secondly, now the polyester manufacturers are consuming the raw materials of May. In addition, the settlement price of PTA in domestic leading manufacturer was 8,850 Yuan/ton in May, and the settlement price of MEG was 7,750 Yuan/ton, thus we can figure out the cost price of direct spinning FDY is about 11,400 Yuan/ton and POY is around 11,100 Yuan/ton. However, the cash quotation of FDY150D/96F is 9,500 Yuan/ton in leading manufacturers and POY150D/48F is near by 9,900 Yuan/ton. Therefore, the PET manufacturer was operating at a loss. The polyester raw material in upstream market tended to be weak since June, the leading negotiating price of PTA is about 7,200-7,250 Yuan/ton in domestic market until now and MEG is around 6,650 Yuan/ton. Calculated from the spot goods, the cost of direct spinning FDY is about 9,660 Yuan/ton and POY is around 9,350 Yuan/ton. This indicates that the loss of PET manufacturers has been narrowed and the pressure of production and operating will be eased. The talk of production-limited quotation also began to be mild in the previous market, so the operating rates of PET manufacturers still stay at the high level.

Finally, according to the tendency of polyester raw material in the upstream, although the price of polyester feedstock in upstream went strong driven by the strength of recent international crude oil, the total weakness did not change in the market. At present, the global macro-aspects are still bearish and the marketers remain concerning its trends. The prospects of dollar index are still bullish due to the uncertainties of Euro Zone debt crisis. The dollar index still has upward expectation in the medium and long term. The fall of crude oil price will be emerged under the influence of strengthening dollar. Moreover, because the polyester enterprises in upstream and downstream is in the edge of preservation and losses, the devices are delayed being put into production and parts of the device have to get repair or be shut down in order to offset the losses. The trends of polyester raw material in upstream are still in weakness limited by the demand and cost.

Generally speaking, although the current price of polyester yarn rebounds back, the basic is unstable. It is just brought by the speculative demand but not the downstream rigid demand and has little continuity. Therefore, it is only a short ease to make up the previous slump of the polyester yarn. If there is no big movement in the polyester plant, the price of polyester yarn will still be weak.