So how to stimulate downstream demand and improve the market situation? Sales promotion for sure. With the end of the month approaching, downstream may need to replenish their stocks and PIY plants may cut inventory. However, the market will sink into weakness quickly afterward. In addition, PIY profits were very thin and most plants were on the deficit edge. September contract price of bright chip may not be lower than August CP, so sales promotion at the end of the month will dampen profits further. Then cut production may be the best choice. But Guxiaodao was running at low rate and other big plants reported tolerable inventory. It’ll still take time to see how the market goes.
Polyester industrial yarn market struggling in the bottom
Polyester textile filament market was heavily impacted by G20 Summit as massive plant shut-downs pushed up spot prices. However, polyester industrial yarn market was very quiet due to limited closures and slack demand.
Guxiandao, Hailide and Huachun were the mainly affected producers. Guxiaodao has kept running at low rates due to poor profits and high inventory. Hailide shut the production of fibers (not for car use), but which occupied only a small part in total capacity. As to Huachun, its total capacity was only 15 kt/year. Therefore, only about 10% of total PIY capacity in China was affected by G20 regulations.
August-September is usually regarded as the slack season of polyester industrial yarn as demand for downstream products for geo-technique or car use, etc. all decrease in hot summer. However, demand was particularly sluggish this year. Domestic sales were restrained by logistic regulations during G20. Downstream plants widely stocked raw materials up with the expectation of higher prices and a few plants purchased about one-month volume. Foreign sales were brisk in the first half of 2016. PIY export growth expanded rapidly, much higher than in 2015. Foreign buyers largely procured ahead of time. But then PIY exports decreased sharply and August/September exports may see negative growth.
PIY monthly inventory in major plants