The bleak polyester market in the first half of the year suddenly exploded around the National Day, and polyester yarn production and sales were in full swing With heavy volume, both upstream and downstream prices have experienced a strong rebound. The listing of short fiber futures just took advantage of this opportunity. It rose to the daily limit four times in six trading days. The market price directly gave a premium of more than 500 yuan in the first month, which shows that bulls are full of confidence. PTA, the main raw material for short fiber, also rose by 200 yuan during the same period. Compared with the downstream increase, it seems even more shabby, but for PTA itself, it is a rare and smooth trend in recent times.
In fact, the textile and apparel industry was very difficult at the beginning of the year. On the one hand, due to the economic downturn in the past two years, the textile and apparel industry had already suffered a lot of losses; on the other hand, after the global outbreak of the new crown epidemic, foreign trade Orders suddenly shrank sharply, making the already sluggish industry even worse.
Who would have thought that since September, the epidemic in India has been out of control, resulting in a large number of export textile companies suspending operations, or significantly reducing operating rates, and being unable to deliver orders on time, resulting in orders that were originally delivered in India. Forced to switch production to China, there are rumors on the Internet that many related textile orders have been scheduled until January next year or even as early as May, including clothing, bed sheets, towels, etc., with an amount of billions of dollars.
The rapid outbreak of demand has led to a sharp increase in textile and clothing orders and a sharp drop in inventory. The terminals are already in full production and still cannot meet the demand, resulting in an increase in the price of production materials. The wave is coming.
It is a fact that prices have increased, and it is also a fact that short fiber stocks have fallen to low levels. But are these orders transmitted online really enough to push raw materials out of a historic rise?
There are still a few points that need to be considered calmly. It stands to reason that the advantage of India’s textile industry is mainly cotton spinning, while polyester accounts for a much smaller proportion. If only orders from India are transferred to China, cotton yarn will undoubtedly be more affected (in fact, these varieties also lead the market after the National Day), while the polyester market has an extra premium due to emotional infection.
Secondly, according to statistics from an organization, China’s textile and clothing exports have recovered significantly since May this year. May was the climax of the evolution of the epidemic in countries such as India and Vietnam, and domestic supply filled the gap. Overseas gaps. After May, China’s textile and clothing export data continued to improve. July was the peak of marginal improvement in fundamental demand. After July, exports fell year-on-year.
After July, the export volume of India and Vietnam began to pick up, and is currently on an upward path. There is still 20% room for growth from the level of previous years. Therefore, although the epidemic in India continues to ferment, but according to this rhythm, the domestic textile industry is in the second half of its climax, so we have to doubt the carnival of capital market sentiment behind the current booming polyester market.
Of course, these are just hidden risks. At present, the load of polyester staple fiber, downstream looms, and texturing are close to full, but they are still unable to meet the surging terminal demand, and inventories are declining rapidly. Since it is impossible to add a large amount of new production capacity in a short period of time, you cannot predict when the spot price will turn around. Such high profits are not unreasonable. Only when demand decreases will high-priced raw materials become unavailable, but this will take time to pass on. Recently, the main market of short fiber has experienced three consecutive declines. It is more due to changes in positions that affect the market. Of course, if the production and sales of short fiber continue to cool down, it will inevitably cause the market to worry about the persistence of demand orders.
Can bottom-up promotion make PTA “young again”? Looking back at past PTA trends, the most classic example of demand pushing PTA’s focus upward is the rebound after the last round of bear market. The golden months of September and October in 2016 and 2017 respectively significantly helped the market rise. However, several epic increases in PTA were either driven by costs or caused by supply-side overhauls.
So even if PTA is at a historical low and positions are at a historical high, it is the best time for bulls to enter the market, but the market just can’t get up. Therefore, grinding is the bottom, and relying solely on the demand side may cause the center of gravity to slowly shift upward. What’s more, there is no guarantee that the demand will always be real.
From the post-holiday rebound of PTA, which was accompanied by a daily increase of 840,000 lots in a single week, it can be seen that the industry is still biased toward hedging. The reason lies on the cost side. As PX gradually turns to serious surplus, profits are transferred to the downstream. But because PTA also has overcapacity, does it have too high a profit?
So as long as crude oil and PX do not rise strongly, PTA prices will rise purely due to downstream demand, leading to an increase in profits. This will inevitably make some manufacturers tempted to lock in profits in advance, that is, to provide short orders to sell on the market. Spot goods. This may explain the small increase in PTA after the holiday, but the sharp increase in positions. Although the current hot demand from terminals can immediately drive up the short-fiber market, for PTA we can only say wait and see and cherish it.
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