the operating rate of downstream plants also collapses

Stocks of grey fabric are high now. Grey fabric manufacturers and traders both have stocks of grey fabric and fabric at hand. Trading volume of different sectors is scarce now, far worse than the same period of past years, with most trading volume below 50% of that during past years. Jun and Jul is traditional lull season, and the substantially volatile feedstock market intensifies the sluggishness. Downstream players witness the worst business in Jul during this year, so the operating rate bounds to reduce. With sharp up-and-down of feedstock price, the operating rate of downstream plants also collapses.

Downstream plants and traders hold anticipation toward the traditional peak season in Aug-Sep, expecting trading volume of grey fabric to rise on the month, but price increment of grey fabric may lack momentum and lag behind with massive inventory of grey fabric.

Many participants hold expectation toward the procurement cycle after price dipped or the peak-season in the second half of year, but it is not suggested to expect too much as sound demand may be short-lived or overall demand may not improve too much finally. The weaving capacity is massive, and stocks of grey fabric are high. Coupled with apparently waning demand this year, downstream players are cautious in restocking. Procurement volume will improve when price is low, but will dramatically shrink when price is high. Therefore, sound sales of PFY lack good continuity, especially after downstream plants get lock-in for several times.

From the angle of grand pattern, end-user demand is poor. Downstream capacity expanded intensively in 2017-2019, resulting into prominently excessive capacity. Downstream twisting units and fabric manufacturing plants have been around break-even line, and the feedstock market is greatly volatile, so deficit range is supposed to extend once operation mistake appears. Especially for the downstream plants that have expanded capacity in recent two years, the future challenges come more from capital fundamental. The future 1-2 years may be the real cold-winter for downstream players. You can get more information about the downstream market from the Operation report of fabric mills in Zhejiang and Jiangsu 

According to current status, even if sales improve in end-Jul, overall tone is supposed to be not optimistic on polyester market if the improvement does not hit expectation. Current stocks in polyester plants seem to be moderate, but inventory accumulation speed is supposed to accelerate after O/R reduction increases and rigid demand dwindled. If demand fails to improve in the first half of Aug, mid-Aug will be tough for the players on polyester market.