In this round of upstream chemical fiber production capacity expansion, a number of backward devices will inevitably be cleared as profits are compressed. However, I did not expect that profits would drop so quickly.
The polyester industry has entered a “cold winter”: total profits decreased by 38.07% year-on-year, and losses of loss-making enterprises increased by 90.85% year-on-year
Data from the National Bureau of Statistics show: from January to September, the main business income of the chemical fiber industry was 639.8 billion yuan, a year-on-year increase of 4.04%; the total profit was 20.2 billion yuan, a year-on-year decrease of 29.1%; industry The loss area reached 24.42%, a year-on-year increase of 3.95 percentage points, and the losses of loss-making enterprises increased significantly by 67.32%. The operating quality of the chemical fiber industry is generally stable, but the industry’s profit margin has declined. From January to September, the operating income profit margin was 3.16%, a year-on-year decrease of 1.48 percentage points.
In terms of industries, the total profit of the polyester industry was 10.02 billion yuan, a year-on-year decrease of 38.07%; the nylon industry was 2.43 billion yuan, a year-on-year decrease of 15.79%.
Table 4 Economic benefits of the chemical fiber industry from January to September 2019
At the same time, the segmented data of the polyester industry also supports the collapse of the market. Since this year, in addition to the slight decline in the profits of DTY, the profits of POY and FDY have dropped significantly. FDY’s disk processing profits have narrowed below the profit and loss line. And almost since the beginning of October, filament profits have been falling, constantly setting new lows this year.
Production capacity expansion will bring bitter consequences, and market demand will make up for it!
Of course, the expansion of upstream chemical fiber production capacity is the main reason for the decline in profits of the entire industry, but market demand has also made up for it!
More than 70% of polyester terminals are related to textiles and clothing, so the strength of polyester demand needs to be judged based on the sales of textiles and clothing. Since textiles and clothing are daily consumer goods, their general trends are highly correlated with my country’s overall economic status, GDP. Judging from historical data, my country’s economic cycle lasts about four years. This cycle started in the second half of 2016 and has lasted for about three years. It has entered the second half of the downward cycle. Therefore, domestic demand for textile and apparel may remain weak.
As for the foreign trade market, for the textile industry, the ups and downs of Sino-US trade relations have always affected the textile market. Regarding the weak foreign trade orders this year, most companies answered that they are affected by foreign trade policies, especially the huge impact of Sino-US trade relations. Many textile bosses said they dare not easily accept orders from the US market this year. In the context of the Sino-US trade war, many other countries have also made adjustments to tariffs, so tariffs are also an important factor affecting companies’ orders.
Since the beginning of this year, domestic market demand has been weak and it is difficult to make substantial improvements. The situation of foreign trade is also average. The lack of domestic sales has also affected foreign trade to a certain extent. The life of downstream textile enterprises this year is not comfortable enough. This is a heavy blow to polyester companies to a certain extent.
In addition to the domestic market, demand for polyester throughout Asia is also decreasing. According to ICIS, demand for polyester in Asia is expected to continue to slow down, as most downstream units have completed year-end orders and there is less enthusiasm to replenish goods at this time. “The end of the year is usually a slow season, so we don’t expect the polyester market to rebound,” said a major regional producer. Major exporters have had to cut prices as downstream units are not keen on replenishing their cargoes.
At the same time, polyester producers are facing rising inventories. Inventories at yarn producers increased to 11-25 days from 10-24 days a week ago, while those at fiber producers increased to 6-13 days from 7-12 days. “Increased inventories mean slower consumption,” the producer said. Polyester producers in India and Southeast Asia are also cutting production amid sluggish demand. An Indian producer said: “Our sales progress is very slow and buyers are not in a hurry to place orders.”
The polyester industry has a long and difficult road ahead if demand is not yet moved and production begins.
In short, the production capacity of the polyester industry and the polyester raw material industry is still concentrated from 2019 to 2020, but the overall demand has not changed significantly. We still need to continue to pay attention to the progress of Sino-US trade and the trend of exchange rates. Large external uncertainties are not yet available. Even if it is eliminated, there is still a risk of demand decline; in the future, the polyester filament yarn and even the polyester industry will face more severe tests. </p
