In September, the operating trends of polyester filament and downstream weaving end showed a certain differentiation. The weaving end continued the momentum of month-on-month improvement since August. Orders, startups, and profits all increased slightly, while gray fabric inventory and raw material stocking gradually decreased. The pressure since the first half of the year has been significantly relieved in the near future, especially in the knitting and home textile fields. Of course, whether it can continue in the future requires further attention.
In contrast, polyester filament end pressure continues to exist, with high inventory and low cash flow in the second half of the year This has been maintained. Even in September, the polyester filament factory failed to effectively destock, and its cash flow has been at a loss. Therefore, generally speaking, at this current node, weaving, especially in the field of home textiles and knitting, is doing better than polyester filament companies.
Chart: Spot cash flow trend chart of conventional gray fabrics in various regions
In the short term, the recovery of the weaving end will provide immediate support for polyester filament. However, under the current high inventory of polyester and the uncertain trend of upstream raw materials, downstream speculative demand is not strong. This has also resulted in the failure to effectively eliminate polyester inventories, and the efficiency has been suppressed at a loss. Inventory digestion and efficiency restoration will still need to be completed by reducing production in the future.
Figure: Year-on-year growth trend of domestic sales of textile machinery from January to June
Looking at the long-term trend, comparing the weaving production capacity and polyester production capacity additions from 2019 to 2020, we found that there has been a certain misalignment in the upstream and downstream production capacity. The weaving end has been reflected in advance due to pressure. In addition, Affected by the epidemic in 2020, the new weaving production capacity has shown a relatively obvious slowdown trend. Judging from the comparison of sales data of textile machinery suppliers, the sales volume of various types of weaving machines has experienced a relatively obvious decline since 2019.
At the same time, polyester and more upstream links have entered the peak period of capacity expansion, and the polyester end will be in the next three years. New production capacity is increasing by 5-5.5 million tons every year, and the upstream and downstream production capacity is misplaced. The weaving end may still be able to further enjoy the dividends brought by low-priced raw materials from the upstream in the future.
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