PFY Prices Set to Decline in China as Chinese Manufacturers Offer Discounts

In the first half of July 2024, the global market for Polyester Filament Yarn (PFY) saw unexpected price increases of about 2.5% in China, a major exporting hub for North American and European markets, despite typically slower seasonal conditions. This rise occurred despite stable prices of primary feedstock PTA (Purified Terephthalic Acid), which helped keep PFY production costs relatively low. However, costs were influenced upward by a 3% increase in prices of secondary feedstock MEG during the same period.

Looking ahead, PFY prices are anticipated to decrease in the coming weeks as leading Chinese producers such as Xin Feng Ming, TongKun, and Hengyi plan to manage rising inventory levels by offering discounts on products like drawn textured yarn (DTY), fully drawn yarn (FDY), and partially oriented yarn (POY). Specifically, PFY prices were reduced by approximately Yuan 200-350/MT on July 23. Market analysts noted a surge in polyester filament inventories alongside critically low downstream raw material supplies among traders, factories, and end-users in China.

Despite recent price hikes, consumer purchasing power remains strained due to historically high PFY prices. Domestically in China, demand for PFY has been sluggish during its traditional slow season, with local polyester plant operation rates decreasing incrementally week by week, dropping to 85.8% in the week ending July 19 from 86.2% the previous week. Furthermore, disruptions from Typhoon Gaemi in eastern China are affecting PTA supplies at key ports, although overall PTA inventories are gradually increasing.

In an effort to stabilize market conditions, some suppliers pre-emptively stocked PTA supplies against potential typhoon-related disruptions. Meanwhile, as of mid-July, Chinese PTA inventories were reported at approximately 2.26 million MT, up from 2.22 million MT a week earlier and 2.18 million MT at the beginning of the month. South China Sea weather conditions have also led to the cancellation of some domestic PTA shipments from Dalian.

Recent challenges have prompted major Chinese PFY manufacturers in regions like Tongxiang, Zhejiang, and Jiangsu to announce production cuts or price adjustments to offset shrinking profit margins and unfavourable export conditions. These adjustments follow earlier production halts due to equipment upgrades, impacting annual filament production capacities. Additionally, environmental compliance measures in June 2024 forced closures of two large PFY plants, initially causing PFY prices to rise before demand weakness took hold.

Looking forward, despite ongoing production challenges across China, PFY prices are projected to decrease due to heightened inventory levels, as manufacturers attempt to stimulate demand through discounted pricing strategies.