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                Polyester yarn profit drops to year’s low – ChinaTexnet.com
                Home >> Textile News >> Polyester yarn profit drops to year’s low

                Polyester yarn profit drops to year’s low

                2022-06-29 08:52:31 CCFGroup

                Recently, buoyed by strong crude oil and surge of PX, lead PSF contracts of PSF futures PF2209 reached the highest since PSF futures were listed, and accordingly, spot PSF price spiked to over 9,000yuan/mt, the highest since Feb 2019. However, polyester yarn price did not climb up so much and was still lower than the high in Mar. In this round of rise, the cash flow of polyester yarn dropped to lower than minus 300yuan/mt, the year’s low.



                The big-ticket crude oil since Russia-Ukraine war has bludgeoned polyester industrial chain greatly, and additionally the tightness of US blended oil supply has escalated the influences on it since May. Especially downstream links, including spinning and the links behind, are mainly small enterprises whose scale, capital and risk resistance are far behind upstream large plants. Therefore, after over three months’ weakness, yarn spinners are weighed increasingly, which could be reflected from this round of price rise. ,


                Firstly, pressure of high inventory. Cotton products were cold-shouldered this year, so a lot of polyester/cotton yarn production was transferred to pure polyester yarn, pushing up the operating rate of polyester yarn. But amid low run rate of downstream weaving sector, polyester yarn supply is successive and now the product inventory has reached years’ high. During Dragon Boat Festival (Jun 3-5), polyester yarn was slightly destocked before the price was adjusted up under the stimulation of raw materials’ surge, but the trades returned to slack when polyester yarn price moved up. Thus, the inventory of polyester yarn will further accumulate in the future.




                Secondly, the pressure of capital, including losses and fund recouping. Polyester yarn has suffered losses for over a month. Recent rise of raw materials has expanded its losses, and the spinners have to destock by underselling. Hard capital recouping exists all around. In past years, 70-80% of the fund could be recouped by Dragon Boat Festival, but this year, it was only 40-50%, and some even lower at 20%. Thus, the spinners are heavily burdened.


                Currently most polyester yarn mills are indifferent to the rise and fall of upstream raw materials. They may buy in some when the price moves up, but they will keep inventory of raw material low. In particular, the price of raw materials are so high at over 9,000yuan/mt and their losses will reach 400yuan/mt if buying spot raw materials for immediate production, so they are likely to procure more cautiously. The market may improve slightly, but more production cut will be seen in Jun-Jul under high inventory and great losses. As a result, overall operating rate including that of polyester/cotton yarn will decline.