cash flow of POY is apparently higher than that of FDY

Except for the production recovery, 2 new PFY units start operation in Aug, mainly manufacturing POY. 300KTA new polyester unit of Tongkun Hengbang Phase VI commenced production on Aug 13, mainly producing POY, and Tongkun Hengyou’s 600KTA polyester new unit started operation on Aug 22, also mainly producing POY, and the on-spec filament yarn is supposed to be available on Aug 24. Half of the capacity will be operated in short run, and complete operation is planned to appear before Nov. In addition, new unit of Xinfengming with 300KTA of capacity has begun operation in Jul, mainly producing POY too, but the run rate is low now, which may gradually rise in later period. New POY capacity will be huge coupled with some new capacity in Sep. However, downstream twisting plants witness meager profit this year, suffering losses in recent two months. The growth rate of twisting machine has been apparently dipped in 2019, and the increment in the second half of 2019 is expected to be smaller than that in H1 2019. Therefore, POY market is anticipated to encounter fierce competition in the future, which may weigh on cash flow.

Currently, cash flow of POY is apparently higher than that of FDY. Taking 150D as an example, cash flow of POY has been higher than that of FDY since Apr. Supply of POY is supposed to continue growing in the future, but barely new FDY capacity will start operation. Thus, cash flow gap of these two descriptions may keep narrowing, and even reverse.

Price of PFY is largely stable, but that of POY heads south in some regions. Discounts in POY plants in Ningbo have enlarged, which is related with the startup of new units to a certain extent. Many production of new unit of Tongkun Hengyou is similar to that in Ningbo, which will compete for market share with Ningbo players.