19 May 2009 07:51 [Source: ICIS news]
By Salmon Aidan Lee
SINGAPORE (ICIS news)--China’s buoyant polyester market has finally succumbed to weakness that could depress values of feedstocks paraxylene (PX) and purified terephthalic acid (PTA) in the region for the rest of the year, market sources said on Tuesday.
Polyester producers have had it good for the past month even amid the global economic downturn as the Chinese government's economic stimulus package helped to induce domestic demand, which had helped fuel the recent rally of PX and PTA.
But at the Canton Trade Fair in Guangzhou early this month, exports prospects for China's polyesters have remained dim with the value of textile orders tumbling almost 20% year-on-year, and down about 17% from the same event held in October last year.
“It’s a case of the beginning of the end. We can very well see a downtrend from here onwards,” said a trader with BCF Trading, a Korean firm based in ?xml:namespace>
PX spot prices traded at $1,100-1,120/tonne (€814-829/tonne) CFR (cost and freight)
Transactions as low as $1,080/tonne CFR Taiwan and/or
PTA, on the other hand, hit a low of $870/tonne CFR China last Friday from a high of $950/tonne CFR China two weeks ago.
“The main reason is downstream markets are now coming off, no longer as strong as before,” said the deputy general manager of Wujiang Heng Li Polyester, a major producer of polyester filament yarns in eastern China.
Sales of polyester in China had dipped after the Labour Day holidays in early May, with some makers saying they could hardly sell more than 20-30% of their daily output some days.
“Occasional spurts of sales, like those last Wednesday when we’d 200% of daily output, are just special cases,” said a sales manager of Jiangsu Senjo, another major producer of polyester filament yarns in eastern
“Overall, we managed about 70% [of daily output] in the past week, and this week had been even slower,” the Senjo sales manager added.
Polyester makers have been accumulating product stocks given weak demand, curbing their needs for feedstocks PX and PTA.
“We have about 15 days’ worth of inventories now,” said a source from Haimen Jinxue, a mid-sized producer of polyester staple fibre in eastern China.
Many polyester makers, as well as spinners and weavers, has been dumping part of their inventories ahead of the change of seasons going into June, market sources said.
Fabric transactions at the
“Don’t be fooled by these numbers, it’s our [downstream customers] dumping their inventories, because come July, they would need to switch to making thicker fabrics for winter wear,” said the deputy general manager of Shaoxing Cifu Polyester, a leading producer of filament yarns and film-grade PET chips in eastern China.
Prices of most grades of polyesters softened in the past two weeks, squeezing the margins for some producers.
“Because of such a bleak outlook, I could not even afford to buy PTA at $870-880/tonne [CFR China],” said an official from Changzhou China Resources Packaging, another leading producer of bottle-grade PET chips.
Some producers like Jiangyin Hua Hong and Jiangsu Sanfangxiang, a production cutback and or plant shutdowns were considering to cut production and shut two polycondensation lines, respectively, company sources said.
There was also the nagging concern about a possibly supply glut with the anticipated start-up of three new PX plants between June and September this year, industry sources said.
These are Fujian Refining and Petrochemical’s 700,000 tonne/year plant and CNOOC-Kings Group’s 800,000 tonne/year facility in southern China and Shanghai Petrochemical’s 600,000 tonne/year unit at Jinshan in eastern China.
“I would not be surprised if the second half of this year would be extremely tough for the whole chain,” said the deputy general manager of Xiang Sheng Polyester, a producer of polyester filament yarns.
($1 = €0.74)
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