China’s polyester demand to stay strong on feedstock cost, rising export orders

SINGAPORE (ICIS)–China’s polyester demand is expected to remain healthy till the end of October amid rising feedstock cost and improving export demand.

Polyester demand showed significant improvement after China’s week-long holiday amid restocking activities from downstream converters.

However, the textile industry is a labor-intensive industry, and once the textile factories in India resume production, China will face falling export orders as India’s textile industry has an advantage due to the lower labour cost.

“I think the stronger polyester demand may only last till end of this month as year-end period is usually the lull season for textile industry,” a polyester producer said.

“The export orders in the textile industry increased sharply in October as some customers moved their orders to the China market from the India market after some textile factories in India closed due to the coronavirus in the country,” a separate major Chinese polyester producer said.

“Our polyester inventories are dropping a lot this month,” the producer said.

China’s polyester sales-to-output ratio jumped to 135-160% in the week ended 16 October, up from 85-125% seen at the end of September, according to ICIS.

The polyester staple fibre (PSF) inventories have fallen to -3 to 5 days from 4 to 12 days at the end of September, ICIS data showed.

“Some PSF producers even have negative inventories, and have pre-sold all their stocks already,” a major PSF producer said.

As a result, spot discussions for PSF 1.4 denier (D) increased further to $0.80-0.83/kg FOB NE Asia this week compared with $0.75-0.78/kg recorded on 13 October.

The rising feedstock cost also lent support to polyester market as major producers had to raise prices to recoup margins.

Co-feedstock monoethylene glycol (MEG) prices surged by nearly 9% compared with the pre-holiday level, with prices closing at $486-490/tonne CFR China Main Ports (CMP) on 19 October, according to ICIS.

Focus article by Judith Wang

Photo: A cloth workshop in Shi Jiazhuang, China. The textile industry is a major downstream market for polyesters. (Xinhua/Shutterstock)