1.Changes in petrochemical products during the Spring Festival.
Tensions in the Middle East pushed oil prices higher during the Chinese New Year this year. As of Feb. 16, WTI and Brent were 5 each$33 barrel and 4$26 per barrel, compared to the price of February 72% and 54%。Driven by the first grade, petrochemical products have appeared to varying degrees.
2.Downstream markets resume production.
Downstream enterprises have resumed operations since February 17. Most DTY plants resumed operations between Feb. 17 and Feb. 24. Most printing and dyeing factories will resume production after February 20. During the Spring Festival this year, the average holiday time of downstream factories is close to 20-25 days, which is not short.
As it will take some time for non-local workers to take up their posts, the operating rate of downstream factories will not return to normal until after the Lantern Festival (February 24). It is expected that by the end of February, the operating rate of downstream plants will return to 70%, and the operating rate of DTY plants may increase to 80-90%. After the market recovers further in early March, the operating rate of downstream units is expected to increase further. At that time, the operating rate of textile mills may be as high as 80%, and the operating rate of DTY factories may rise to about 95%.
3.Downstream orders are expected after the Spring Festival.
Before the Spring Festival (February 10), why are textile companies busy? One of the reasons is that the Spring Festival is late this year, and normal production and work will not be resumed until the end of February. At that time, spring clothes will be widely released, and the production of summer clothes will enter a full-scale stage. Therefore, it is necessary to order spring and summer domestic sales in advance before the Spring Festival. Another major reason is the resumption of foreign trade orders, a large part of which may come from pre-orders during the holy month of Ramadan.
Compared to the same period in 2023, it is believed that demand may weaken after the Chinese New Year in 2024. First of all, the release of pent-up demand has weakened, including hotel decoration, wedding demand, etc. Secondly, the area of real estate completions has decreased significantly, resulting in a weakening of demand for home textiles and home improvement in the later cycle. Once again, there has been no further progress in BIS certification in India. Coupled with the disruption in the shipping market caused by the Red Sea crisis, PFY exports have not been able to sustain the high growth in recent months. Finally, with the postponement of the Spring Festival this year, some orders are mainly Ramadan orders and some domestic orders are advanced. Therefore, it is recommended that downstream orders should not be overly optimistic after the Spring Festival.
But it is also impossible to be too pessimistic, because the overall view should be neutral. Grey fabric inventories, as well as textile and apparel inventories, are healthy in downstream factories. Real demand is expected to decrease in the first half of 2024, and replenishment needs are critical. At least in the first half of 2024, replenishment needs are likely to continue. For example, a textile mill may initially maintain high capacity and hoard inventory even if there are not many orders. Fabric dealers can also see a better market position.
Judging from the downstream market survey, the orders were moderate and did not exceed expectations, and should be noted in the future.
4.During and after the Spring Festival**and inventory changes**.
During the Spring Festival holiday, most polyester companies suspended sales from February 10 to February 14, and gradually resumed sales from February 15 to February 17, but sales were still sluggish. The average inventory of PFY is expected to increase by 5-6 days. It is estimated that the POY and FDY comprehensive inventory time is 18-19 days. Mainstream polyester companies raised their prices on the first day of resumption of work after the holiday, with POY and DTY FDY rising by 100 yuan and 50-100 yuan tons respectively.
Before the Spring Festival holiday, the PFY inventory of downstream factories was more than 20 days, the same as in 2023. If downstream factories resume normal production after February 24, PFY inventory could theoretically guarantee production around mid-March. Polyester companies may face some selling pressure before the end of February, and inventories may increase further.
Supported by the higher operating rate in the downstream market, the polyester market inventory may decrease in March, but this will take a while, it may take a month or two. Downstream actual orders and raw material speculation should be taken into account. Overall, polyester companies are expected to face some pressure after the Spring Festival holiday. But in the long run, since the new capacity in 2024 is not large, destocking is not a concern, it is only a matter of time.
5.Polyester operating rate before and after the Spring Festival.
Before the Spring Festival, the lowest polyester operating rate is about 79%, and after some factories resume production in mid-February, it may recover to about 89% at the end of February, and there may be a peak in late February. The specific data depends on the restart of polyester enterprises. Polyester companies are likely to see high inventories and high run rates in early March.
It is expected that the polyester operating rate in February will average 839%, and if downstream plant operating rates can return to high levels, it could rise to around 90% in March and 91% in April.
There are some uncertainties in the speed of polyester polymerization from May to July, and there are two points worth noting: first, the destocking of PFY enterprises from March to April; Theoretically, inventories should be effectively reduced during the traditional peak season, while it is difficult to fall during the off-season. Otherwise, the start rate of polyester will be slowed down. If downstream demand is lower than expected, inventories could accumulate rapidly, which will also put pressure on high operating rates in the downstream industry. Secondly,With the support of moderate orders, the operating rate of polyester bottle flakes plants in the first quarter of 2024 may not face significant downward pressure, but it may face downward pressure in the second quarter.