Global Polyester Market Is Bearish

Market Intelligence

Global Polyester Market Is Bearish

US spot paraxylene values were last talked notionally near $800/mt and were not expected to post significant near-term gains as the market globally remained long. Sources pointed to recent significant capacity additions in Asia as a driver behind the length and lower pricing. Asian paraxylene is expected to continue tracking the movement in downstream purified terephthalic acid this week, ahead of the monthly Asian Contract Price negotiations later this week, which could set the tone for September spot pricing. In downstream monoethylene glycol, prices are likely to be stable to firmer this week amid expectations of lower supply. MEG stocks at East China main ports stood at 918,000 mt last week, the first time it has had fallen below the 1 million mt mark since the end of January, according to S&P Global Platts. Around 100,000 mt of MEG is expected to arrive in China this week, well below the typical weekly import level of 200,000 mt, market sources said. Meanwhile, demand is firm with the operating rates of downstream polyester plants rising to 88%-90% of overall capacity in China, two market sources said. In plant news, Taiwan's Nan YA Plastics Corp. had restarted its 720,000 mt/year No.4 MEG plant at Mailiao last week after a technical glitch earlier. Meanwhile, market sentiment is expected to remain bearish for Asian purified terephthalic acid this week with ample supply and new start-up capacity expectation. Physical spot discussions are likely to remain tepid due to the wide bid/offer spread reported. PetroChina Guangdong to build world's largest single-train paraxylene unit PetroChina Guangdong Petrochemical Company has selected Honeywell UOP to build the world's largest single-train paraxylene unit at its new integrated petrochemical complex in Jieyang, Guangdong province, Honeywell said in a statement. The new light desorbent parex aromatics complex will be able to produce 2.6 million mt/year of PX, using sulfolane, isomar, tatoray and olefin removal processes. Trial operation at the petrochemical units will begin in December 2021. China's polyester demand, production remains dull China's polyester output was lower in August from the previous month, with plant operating rates in September likely to remain capped by increased uncertainty over the US-China trade spat. August average operating rate of domestic polyester plants was at 84.4%, down from July's full-month average of 86.4%, according to ICIS data. Polyester production in China began to slow down in July amid lacklustre downstream sales and growing concerns over possible US tariffs on downstream products such as garments, apparels and shoes. Around mid-August, operating rates at Chinese plants increased, accompanied by a spike in their sales-to-output ratio, after the US said that tariff implementation on some chemicals and plastics would be delayed until 15 December from 1 September. For September, some market players expect China's polyester production to increase slightly, but the general consensus is that there will be little support for plant operating rates to return to peak levels of 87.5% in April and 86.6% in June, for the rest of 2019. Lower production, meanwhile, enabled producers to keep polyester inventory levels at manageable levels. Recent declines in domestic polyester prices have also enabled Chinese sellers to boost exports. Buying has largely remained cautious amid volatile feedstock markets and weakness in global macroeconomic conditions. China's polyester sales have mostly been lackluster in the year, with buyers largely adopting a cautious procurement pattern in which they only buy cargoes for immediate requirements. End-users are expected to maintain this buying pattern going forward, in view of the ongoing US-China trade row. This is also a reflection of ample spot market supply as Chinese polyester run rates are running at historical high levels despite sharp capacity additions in the last two years. Lukewarm demand, coupled with increased supply, has seen polyester prices falling to levels last seen in mid-2017. India's polyester fabric production falls In a major boost for India's MMF sector, a recent report by Niti Aayog has recommended removal of inverted duty structure on manmade fibres. It has also proposed abolition of anti-dumping duty on PTA and viscose staple fibre. In India, polyester fabric production has decreased by almost half from 13,000 metric tonnes to 7,500 metric tonnes in Surat. According to Southern Gujarat Chamber of Commerce and Industry (SGCCI), growth rate of polyester fabric production has decreased by 40% per annum after the imposition of the GST in 2016. Higher cost of raw materials including yarn, and imports of cheap fabrics from China, Bangladesh and other Asian countries is further hurting the Surat MMF sector. Powerlooms in the cluster have come down from 6.50 lakh looms some years ago, to 5.50 lakh looms now.