Before Spring Festival, What Situation Is It Going to Be About PFY

With the coming of Spring Festival, the textile industry is moving forward to closing the market and shutting down the machines. However, in recent trading days, the PFY (polyester filament yarn) price contrarily increased and its tendency was deviating from the fundamental plane; this arouses a discussion about how PFY price will develop by the dealers.

Now let’s discuss what causes the recent increase of the PFY price.

Firstly, the growing pressure upon the upstream cost brings the increase of PFY price.

Due to the continuous high level of the oil price recently, the price of PVC and its derivant PX, PTA, EG keeps rising. By Jan 13, the Asian isomerized MX climbed up to 1, 023 dollars/ton FOB Korea; Asian PX climbed up greatly to 1, 577 dollars/ton FOB Korea; European PX climbed up to 1, 499 dollars/ton FOB Rotterdam. In the inner market, the mainstream negotiated price of PTA increased to 10, 450-10, 500 yuan/ton. In the outskirt spot goods market, the mainstream negotiated price of Taiwan goods increased to 1, 330-1, 340 dollars/ton and the Korean goods quoted at 1, 330-1, 335 dollars/ton. The quotation of MEG in the East China inner maker increased to 9, 050-9, 100 yuan/ton and the negotiated price was 9, 000-9, 050 yuan/ton. The semi-dull Polyester chips’ quotation increased to 12, 600-12, 700 yuan/ton. These all showed the strong increasing tendency of the PET raw material price in the upstream and the increase of the upstream cost accordingly brought the gradual rising of the downstream PFY price.

Since last Wednesday, the polyester yarn price had been increasing commonly in Jiangsu-Zhejiang market, China. By Jan 14, a local direct spinning manufacturer in Shengze, China, quoted that the FDY continuously increased 200-500 yuan/ton; some specific super-fine denier increased 1, 000 yuan/ton; POY increased 100 yuan/ton generally, DTY increased 100-200 yuan/ton; now the FDY 50D/48F was 18, 700 yuan/ton. Another local melt spinning factory quoted that the lustrous FDY increased 300-500 yuan/ton; semi-dull FDY increased 300 yuan/ton generally; the DTY increased 100-200 yuan/ton; now the lustrous FDY 50D/36F was 19, 500 yuan/ton. And the other slicing factory’s quotation commonly increased 200 yuan/ton; now the lustrous FDY 40D/24F was quoted at 18, 400 yuan/ton. One of the mainstream manufacturers quoted POY with a constant increase of 100-200 yuan/ton and FDY with 200-400 yuan/ton in Taicang, China. In Xiao Shan, a local mainstream polyester yarn manufacturer’s quotation generally increased 200 yuan/ton; now they quoted FDY 50D/24F 17, 600 yuan/ton and low-stretch DTY 150D/48F 15, 200 yuan/ton. Another local mainstream POY manufacturer’s quotation increased 100 yuan/ton and their FDY generally increased 150 yuan/ton. In Tong Xiang market, the polyester yarn’s price keeps growing today. A local mainstream manufacturer reported a common increase of DTY black yarn with 200 yuan/ton and others increased 100 yuan/ton. Now they quoted POY 150D/48F 13, 800 yuan/ton and DTY 150D/48F 15, 300 yuan/ton.

However, it is still during slack season in the market; the weaving factories were mostly doing the endings and their production strength and the demand for the raw material was not strong. Therefore, it can be conclude that the polyester yarn manufacturers considered more on the upstream cost pressure than the downstream market demand.

Secondly, the cost stimulates the strong increasing of the upstream raw material.

See from the recent situation of the international oil market; the U.S Alaska oil tunnel was shut because of leaking, so people were wondering that some areas of U.S. may have oil interruption. Affected by this, the crude oil price is always consolidating at 90 dollars/drum. Moreover, the insiders also believe that the crude oil price may keep increasing in the short run; the reason is that the economy of U.S. is recovering in a good way and the demand for oil will constantly increase. Besides, the consumption of the automobiles has no reducing trend, and all the car markets are extremely prosperous in China. The booming of the car market will long support the increase of the oil price. Therefore, the continuous high level of the oil price certainly will strengthen the price of PVC and its derivant PX, PTA, EG.

Thirdly, under no stock pressure, the polyester yarn manufacturers’ wish to raise the price is strong.

In 2010, the whole textile industry developed beneficially. In addition with the limited production to power in June to September and other factors, the stock pressure of the polyester yarn manufacturers is not high generally. Presently, most manufacturers’ stock cycle is around week-time, which at least reduced by 10-day amount of the storage compared with the same period last year. Moreover, 2010 was the most excessively profitable year for the chemical fiber manufacturers and the recent storage does not give any pressure for them at all. And the present situation is that people only do purchase when the price is increasing, so the polyester yarn manufacturers’ wish to raise the price is strong. 

Lastly, the terminal capacity increased greatly, and its rigid demand for the raw material is strong.

The textile industry, especially the weaving industry is prosperous this year, which makes the factories grab the opportunity to enlarge the capacity. Due to its low threshold, many small factories will come out like bamboo shoots after a spring shower. Take Shengze, the biggest lining producing base in China, for example. According to incomplete statistics, there were more than 120 thousand shuttleless looms there which increases 30%-40% in 2010. This amount has already surpassed the sum of Korea, Japan and Taiwan, China. If added the amount in the surrounding towns, this number will be bigger. However, the loom must operate if it was purchased, so we can foresee a rigid demand afterwards.

Prediction: to sum up, the decisive factor that affects the polyester yarn price is in the hands of the manufacturer themselves and the upstream cost was just a coincident. The downstream buyers’ attitude will accordingly determine the manufacturers’ choice to increase the price. However, considered that the downstream market and the traders have already made a cover at the beginning, the demand will not grow in a short term. So I think if there were no important emergency incidents, the polyester yarn market will still under the present situation and the price will steadily increase.