Chinese polyester producers lower operating rates on high inventory

08 March 2012 06:43  [Source: ICIS news]

SINGAPORE (ICIS)--China’s major polyester producers have reduced the operating rates at their yarn and fibre plants because of high inventory levels, resulting from a slow demand recovery following the Lunar New Year, they said on Thursday.

Some producers said they have lowered their operating rates by 5-20% from last week to relieve high inventory pressure.

The producers added that most polyester yarn plants have over a month’s worth of inventory, compared to 10 days’ worth before the Lunar New Year holiday.

The inventory levels grew because of a slow demand recovery from the downstream textile converting sector.

According to the producers, including Huahong Group, Zhejiang Hengyi Group, and Zhejiang Guxiandao Industrial Fiber, the average plant operating rates have fallen from 80% in early February to 75%.  

“We plan to reduce the operating rates at our polyester plants if sales continue to be bad,” a company source from Huahong Group said.

The buying interest from the downstream spinning and weaving industries has been weak because of slower exports, the rising Chinese currency appreciation and increased labour costs.

In addition, high feedstock purified terephthalic acid (PTA) prices have squeezed the margins of polyester producers, leading them to lower their production rates in order to minimise their losses.

PTA prices closed at $1,184-1,202/tonne (€900-914/tonne) CFR (cost & freight) China on 7 March, according to ICIS data.

On 2 March, producers’ margins from manufacturing partially oriented yarn (POY) 150D/48F narrowed to yuan (CNY) 0-180/tonne ($0.00-28.50/tonne), while those from producing polyester staple fibre (PSF) narrowed to CNY80-130/tonne.

However, most polyester producers said they are expecting the market to improve when the upcoming peak textile manufacturing season starts in late March or April, which will help ease their high inventory pressure.

Additional reporting by Sunny Chen and Becky Zhang

($1 = €0.76, $1 = CNY6.31)

By: Judith Wang
+65 6780 4359

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