china polyester industry review & outlook

China Polyester Industry

Review & Outlook

Charles Guo

Senior Analyst /CCF

June 2015, India

About us

• Major Chinese enterprises take CCF index as business reference as well as performance evaluation.

• Pecinfo founded in 2012. CCFGroup has released market info on petrochemicals and aromatics since 2014.

• CCFGroup work for 90% polyester enterprises, 95% viscose enterprises in China

• Found in 1997, the 1st China Man-made Fiber Industry Consultancy in China.

CCF TTEB

CTTMPECinfo

CCFGroup

CCFGroup services

including website

membership, market

research, industry

conference, smart

phone App for iPhone &

Android users, etc.

CCFGroup has

extended the strengths

in chemical fiber

industry to

petrochemicals,

together with CCF, TTEB

and PECinfo.

China polyester review

China polyester outlook

Conclusion

6

8

10

12

14

16

0

10

20

30

40

50

2006 2009 2012 2015

%房地产开发投资额_累计增长(%)

GDP累计增速(%)

Real estate investment growth

GDP growth, RHS

-30

0

30

60

90

120

0

10

20

30

40

50

2005 2007 2009 2011 2013 2015

%固定资产投资完成额_累计增长(%)

新增固定资产投资_累计增长(%)

房地产开发投资额_累计增长(%)

Newly added fixed asset investment, RHS

Real estate investment, RHS

Total fixed asset investment

China Polyester--Macro economy

-60-40-20

020406080

100

2005 2007 2009 2011 2013 2015

出口总值_累计增长(%)

进口总值_累计增长(%)

Cumulative growth of export value %Cumulative growth of import value %

0

5

10

15

20

25

2005 2007 2009 2011 2013 2015

社会消费品零售总额_累计增长(%)cumulative growth of retail sales of social consumer goods %

1. Oversupply intensified in the whole polyester chain with slower demand.

2. PTA factories united to curb production amid squeezing margins.

3.“Disappearing ACP” leads to wider fluctuating range of market price.

4. Polyester O/R continued slipping amid fiercer periodical fluctuations.

5. More polyester products exported to the overseas while imports of polyester raw materials are decreasing.

China Polyester Review

Main features

Key word I: Non-fiber PET increases


The majority remains the fiber grade polymer, while the capacity of non-fiber products are growing.

PFY&FGPET 67%

BGPET

17%

PSF

14%

PET film

2%

PFY&FGPET 65%

BGPET

17%

PSF

15%

PET film

3%

China Polymer classifications

2012 2014

Polymer Capa(10kt) Percentage of Asia Percentage of world

PFY&FGPET 2861 76% 71%

BG PET 746 55.7% 28%

PSF 655 57% 53.2%

PET Film 156 53.8% 44.6%

Total 4418 66% 52.6%


China polyester capacity in 2014 by product

Key word II: Oversupply


By 2014, China polyester polymerization capacity reached about 4.4 million metric tons.

29.3%

47.9%

21.3%

18.5%

30.5%

24.7%

3.1%

8.7%

8.1%

6.3%

5.3%

14.8%

15.6%

10.9%

7.6%

0%

10%

20%

30%

40%

50%

60%

0

1000

2000

3000

4000

5000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

capacity(10kta) Growth(y-o-y)

China polyester capacity and growth

China Polyester ReviewChina polyester supply and demand

Unit:10KT

17%

16%

10%

8%

2%

0%

5%

10%

15%

20%

0

1000

2000

3000

4000

2009 2010 2011 2012 2013 2014

Output Yearly growth

0

5

10

15

20

25

30

Jan

-14

Feb

-14

Mar

-14

Ap

r-1

4

May

-14

Jun

-14

Jul-

14

Au

g-14

Sep

-14

Oct

-14

No

v-1

4

Dec

-14

Days

POY inventory


Polyester O/R continued slipping amid fiercer periodical fluctuations

China polyester industry kept operating near

the bottom in 2014 with slower end-user

demand growth but oversupply. Overall

polyester O/R was lower than 2013 level as

some large scale enterprises took the initiative

to curb production and some PET chip and PSF

producers who were in severe losses

previously have reinforced the strength of

output cut.

50

60

70

80

90

100% Polyester O/R

Key word III: Thinner Downstream

Textured yarn machines investment slowdown

• In 2014, twisting machines increased by 800

pieces or 6.02% to 14,100 pieces. But small-

scale twisters were unwilling to invest in new

expansions amid relatively high receivables

accounts and sales cost though cash flows

were not bad. In 2014, incremental machines

mainly come from some large-scale twisting

plants or spinning plants.

12%

6%

5%

10%

17%

11%

7% 6%

6%

0%

4%

8%

12%

16%

20%

0

400

800

1200

1600 New looms Growth rate

Textile industry maintained steady operations in 2014

• Given low feedstock prices, weaving

margins improved and inventory pressure

eased but the amount of receivable

accounts remained high and quite a few

weaving plants went bankrupt. The

average loom run rate was about 67.5% in

2014, down 0.5% from 2013 rate.

0

10

20

30

40

50

60

70

80

90 Weaving loom O/R

2014 2013

Textile industry maintained steady operations in 2014

Although indicators showed recovering signs, the growth rates of textiles and apparel were both low comparing to previous rates. Excluding the impact of bubbles in trade data of last year, exports of 2014 still improved limitedly.

-20%

-10%

0%

10%

20%

30%

0

500

1000

1500

2000

2500

3000

3500 Textile & apparel export

Growth rate

According to National Bureau of Statistics, the growth rate of domestic textile and apparel sales declined somewhat despite rebounds in the second and third quarters.

0

5

10

15

20

25

30

35 %

服装鞋帽、针、纺织品类商品零售类值…

服装类商品零售类值_累计增长(%)

Apparel, shoes, hats, knited products & textile

Apparel

Domestic salesExport

Key word V: Polyester-Better profit


Oversupply in upstream section intensified, squeezing PX/PTA margin

2014 capacity growth:

PTA: 30.6% PX : 13.6% Polyester: 8.2%

China Polyester ReviewOversupply in upstream section intensified, squeezing PX/PTA margin

362

444

339

624

578 576

360

0

100

200

300

400

500

600

700

0

200

400

600

800

1000

1200

1400

1600

1800

2008 2009 2010 2011 2012 2013 2014

PX-naphtha yearly price spread

价差 CFR日本石脑油 CFR中国 PX

mt/$

Spread Naphtha CFR PX CFR

PTA plants have been stuck in losses for over two years. In 2014, spread between PX & naphtha also decreased sharply from 2013’s $576/mt to $362/mt. Cash flow of PX has been squeezed by more than $200/mt.

0

400

800

1200

1600

2000

2400

2800

3200

3600

4000

4400

0

2000

4000

6000

8000

10000

12000

14000

2010 2011 2012 2013 2014

yuan/mt

PTA margin

PTA内盘生产价差内盘PTA价格PTA-PX*0.665 PTA price


Pressure of capacity glut in polyester market eased somewhat

Cash flow of PFY and PSF has improved substantially and margins of PET bottle chip

and fiber chip have broken even.

-200

-100

0

100

200

300

400

500

SD PET chip POY FDY DTY PET bottle chip PSF

2013 2014

Key word IV: Production cutbacks, wider price fluctuation


PTA factories united to curb production, price moving range widens

China PTA O/R dropped sharply from 80-90% early 2014 to 60-70% in mid-year, pushing price to

rebound substantially. But entering the third quarter, polyester feedstock slipped again as the PTA

alliance divided. The drastic move of PTA O/R widened the price moving range of polyester products.

40

55

70

85

100

4000

6000

8000

10000

12000%Yuan/mt POY150D/48F PTA spot PTA O/R


PX: ACP impact fading away, spot proportion up

Asian PX market fluctuated on a steep downtrend in

2014 under the double impact of oversupply and

plunging crude oil. PX prices rebounded strongly and

rushed to the yearly high during May and July due to

production curtailment and delayed new capacities.

Major Chinese PX ACP buyers choose to use PX spot

average price in PTA contact settlement, so PX ACP

negotiation will become more difficult in 2015.

2014 Asian major suppliers PX spot

Jan 1415 1353

Feb No settlement 1290.5

Mar No settlement 1206

Apr No settlement 1212

May No settlement 1221

Jun No settlement 1341

Jul No settlement 1418

Aug No settlement 1361

Sep No settlement 1257

Oct 1210 1105

Nov No settlement 1017.5

Dec No settlement 877

Key word VI: Export & Import


PX Import dependency drops

PX import volumes are estimated to decrease gradually year-on-year with more new domestic units to be on

stream.

45.45%

37.41%

43.38%

45.61%

51.43%

49.60%

47.62%

30%

35%

40%

45%

50%

55%

0 1 2 3 4 5 6 7 82009 2010 2011 2012 2013 2014 2015*


PTA Import dependency also going down

PTA export volume may keep increasing rapidly and the monthly export volume may excess 50 KT in 2015

while the monthly import volume may decrease to around 50 KT, so PTA import and export may reach a

balance or China may even become a net exporter.

41.67%38.91%

34.34%31.47%

27.54%

20.89%

9.54%4.02%

1.96%

-10%

0%

10%

20%

30%

40%

50%

-150

0

150

300

450

600

750

2007年 2008年 2009年 2010年 2011年 2012年 2013年 2014年 2015年*

出口量进口量进口依存度Exports Imports Import dependency

2007 2008 2009 2010 2011 2012 2013 2014 2015E


China polyester export growth by product

-40%

-20%

0%

20%

40%

60%

0

50

100

150

200

250

2010 2011 2012 2013 2014

10KT

ExportsPFY volume PSF volumeBG PET chip volume PFYPSF BG PET chip

6

6.5

7

7.5

8

8.5

9

6.08

6.1

6.12

6.14

6.16

6.18

Exchange rates

USD/CNY EUR/CNY

China polyester outlook in 2015


• Polyester capacity may keep high speed growth in 2015. Polyester capacity is anticipated to increase by 3.35 million tons in 2015, but effective capacity may be around 2.7 million tons, considering some plants may only start up half the total and some may get delayed.

Product Company Capacity (kt/yr) Start-up time

PFY Southeast New Materials 400 Early Mar

Xin Feng Ming Zhongshi (Huzhou) 250 Mid Mar

Xiaoshan Shuangtu 250 End Mar

Shenghong Chemical Fiber (Guowang) 250 Late Mar

Huaxiang High Fiber 400 Feed the unit in Apr, and start 50%

Xin Feng Ming Zhongshi (Huzhou) 250 Second half of 2015

Jiangyin Xingye Polytech(Sanfangxiang) 200 Second half of 2015

Xiaoshan Shuangtu 250 Second half of 2015

Xiaoshan Hongjian 200 May be delayed

Siyang Haixin 250 May be delayed

Fujian Jingwei 200 Q4 2015

PET film Fujian Billion 200 Second half of 2015

PSF Fujian Shanli 250 Jan

Total 3350kt


• Ningbo Zhongjin Petrochemical will newly add 1.8 million tons/yr of PX unit. PX market may

adjust further on supply pressure outside China. But everything is possible, especially in

2015, such as Dragon’s explosion, etc.

•

• Total PTA capacity may reach 50 million mt/yr in 2015, and its absolute amount will be much

higher than polyester capacity by end year. If taking the coefficient 0.86 into consideration

while calculating PTA demand of polyester sector, PTA run rate may face great pressure.

•

• MEG will welcome its startup cycle after years of interregnum, so the market climate may

weaken. But it developed in a relatively healthy way in Q1 2015 as O/R stays at low levels.

Polyester Filament Yarn

Overcapacity may stay unchanged in 2015 .

PFY spot is expected to fluctuate in line with feedstock.

PFY producers are able to gain some margins through lower cost than before.

Besides, profits in downstream weaving plants also improved amid lower PFY prices.

72.4%

76.9% 78.1%

77.3%

74.3%

68.6%

67.6%

60%

64%

68%

72%

76%

80%

0

500

1000

1500

2000

2500

2009 2010 2011 2012 2013 2014 2015

10KT Output Demand Capacity utilization

-200

0

200

400

600

800

2014Q1 2014Q2 2014Q3 2014Q4 2015Q1

Yuan/mt

Quarterly average PFY cash flow

POY150D FDY150D DTY150D

Bottle grade PET chip

Depend on feedstock: Spot price of PET bottle chip is expected to fluctuate in line with feedstock.

S/D improves: Supply and demand situation is expected to improve somewhat in China.

Anti-dumping: Export demand may be affected regionally by the anti-dumping measures.

Better profit: Cash flow is likely to improve further.

0

5

10

15

20

25

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

10KTExports

2014 2015

-60%

-30%

0%

30%

60%

90%

120%

Jan

-10

Jun

-10

No

v-1

0

Ap

r-11

Sep

-11

Feb

-12

Jul-

12

Dec

-12

May

-13

Oct

-13

Mar

-14

Au

g-14

Jan

-15

Jun

-15

Accumulative growth for domestic demand

Accumulative growth for export

0

200

400

600

800

2009 2010 2011 2012 2013 2014 2015* 2016* 2017*

Capacity,10KT

Capacity glut of direct-spun PSF may remain

severe in 2015 as most new plants built in 2014

will be released in 2015.

Avoid unhealthy competition: Producers still

need to actively control O/R, strongly expand

export market and increase differential products

to avoid unhealthy competition.

Market fluctuation may intensify : Influence

form the bottom approaching cotton price may

emerge in 2015. Under the background of

sluggish domestic demand and stuck end-user

export, PSF stock has to be strictly controlled to

avoid risks. Meanwhile, market fluctuation may

intensify given PSF futures is released.

Polyester Staple Fiber

-200

-100

0

100

200

300

400

Q1 Q2 Q3 Q4

Cash flow quarterly in 2013-20152013 2014 2015

Conclusion

• 1. Profits of polyester products may improves in 2015 amid

lower cost;

• 2. Supply and demand remains key focus;

• 3. Overseas exploration of polyester product and feedstock PTA ;

• 4. Market fluctuation may intensify ;

Invitation

• The 3rd International PET forum will be held on Nov 5-6, 2015.

• In 2014, we invited famous industry experts from China, South Korea, India, Germany and Italy, with attendees from over 15 countries. Topics involves polyester feedstock, PET bottle chip, PET film, PET sheets, PET Technologies, beverage, etc. This year, one of our focuses will be on RPET.

• If you have plans to join us, please contact me or my colleague Gavin after the conference.

PET

producer

29%

Food &

beverage

23%

PET trader

17%

Preform &

Packaging

12%

Feedstock

supplier

9%

Equipments

suppliers

6%

Financial or

others

4%

Attendees Classification

• 谢谢！

Tel:0571-83786512

E-mail: [email protected]

Skype:charles514617_4

china polyester industry review & outlook

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