Weaving Boom Cycle Has Passed! This Year Will Obviously Drag Down The Whole Polyester Industry Chain.

Thanks to environmental protection upgrading and terminal promotion, the polyester industry has entered a boom cycle since 2017, and the capacity expansion has accelerated, and the industry concentration has been greatly improved. In 2019, the original planned polyester production capacity was 5 million 300 thousand tons. The new capacity was mainly concentrated in the large enterprises such as Tong Kun, new Feng Ming and Heng Yi, so as to expand the market share and enhance the concentration of the industry. However, prices of all polyester products showed a year-round downward trend this year due to the gradual decline of upstream raw material prices and the drag of the terminal fabric market.

　　 Due to the uneven pace of expansion of the industrial chain, with the expansion of production capacity and polyester competition, raw material stage is relatively strong, which has reduced the profitability of polyester factories. In addition to the better polyester filament DTY, it can still maintain positive cash flow, and other types of polyester products are in a negative cash flow state. From the annual average point of view, the average cash flow of polyester products this year dropped significantly compared with last year, especially the daily average cash flow of PET chips fell sharply by 460 yuan / ton compared with last year.

With the expansion of production capacity, polyester competition intensified, polyester profit level declined significantly, and polyester production capacity in the future tends to be rational. Especially since the second half of this year, the market has been in a doldrums, the cash flow has plunged into losses, and the enthusiasm of new production capacity has been eliminated. This year, the new capacity of polyester has been put in 3 million 450 thousand tons / year.

By the end of 2019, domestic production capacity of polyester will reach 55 million 570 thousand tons per year, with capacity growth of 6.6%, down 1.2 percentage points from the previous year. The peak of polyester production will come to an end, and the new production capacity will be stable in the future. The production capacity of polyester in 2020 is about 5 million 300 thousand tons / year. Considering the possibility of delayed commissioning of some units, the actual production capacity is estimated at 4 million tons / year.

It is estimated that by the end of 2020, domestic polyester production capacity will reach 59 million 570 thousand tons / year, the capacity growth will be 7.2%, and the industrial concentration of polyester industry will continue to improve in the future.

Terminal consumption of textile and spun clothing is weak, which is a significant drag on the whole polyester industry chain. In terms of external demand, since September 1st, the United States has formally imposed a 15% tariff on 300 billion US dollars, including most clothing and household textiles. In September, China's exports to the United States decreased, of which clothing and home textiles decreased by 21.8% and 8.5% respectively. By the end of October, the United States had excluded 12 of the products of the $200 billion product in China.

According to the US import statistics, in the 1-9 months, 12 imported tax products from the United States totaled 188 million US dollars, accounting for only 0.5% of the total imports and exports of China's textile and apparel in the same period. At present, China and the United States have reached the first stage agreement, the trade situation has eased somewhat earlier, but there is still a high degree of uncertainty in the future, and external demand may continue to be affected.

In terms of domestic demand, domestic textile and garment retail sales totaled 1 trillion and 62 billion 370 million yuan in 1-10 months, an increase of 2.8% over the same period last year, a 5.6 percentage point decline from last year's growth rate.

And looking forward to 2020, in the context of the global economic slowdown, the textile and garment market will not have much improvement next year. With the continuous decline of consumer confidence, the growth of clothing retail sales will continue to decline.

It can be said that the weaving boom cycle has passed, and the industry is still affected by three mountains.

1, domestic demand storage

Polyester terminal 70% is related to textile and clothing, so it is necessary to judge the strength of polyester according to the sales situation of textile and clothing. Because textile and apparel belong to daily consumer goods, its general trend is highly correlated with the overall economic situation of China GDP. From historical data, China's economic cycle lasted about 4 years. The current polyester boom cycle began in the second half of 2016, and profits have entered a deficit. Sales of clothing have peaked at the beginning of 2018, and the growth rate has been maintained at a low level of 3%. The current growth rate of GDP is low. Therefore, domestic demand for textile and clothing will remain weak until at least half of 2020.

　　 2, terminal investment slowed down

From the perspective of the fixed assets investment of the terminal textile industry, it has a certain correlation with the textile industry profits. In 2017, the textile profits of the lower reaches of the textile industry started to improve. (with terminal water jet looms and other environmental factors), we also saw that the downstream fixed assets investment began to rebound, and profits began to peak in 2019. The transfer of production capacity has been slowed down, and investment in fixed assets has also slowed down.

This can also be verified from the number of new additions to the terminal loader. In 2016, the number of new ammo aircraft was still relatively small, but the 2017-2018 year increase in the number of ammo increased. But in the 2019-2020 year, the growth rate of the DDG is expected to decrease significantly.

　　 3, terminal export growth slowed down VS polyester direct exports slightly increased

In 2019 1-11, China's export of textile yarn, fabrics and products, clothing and accessories increased by 3.09% year-on-year, and this year's overall growth rate has dropped to a higher level than in previous years, and has entered a negative growth stage. And with the uncertainty of Sino US relations and the anticipation of the global economic downturn, it is expected that the export situation will still not improve in the short term.

In addition, in recent years, domestic terminal textile and garment enterprises have also increased their capacity transfer to Southeast Asia and other regions, as well as the rapid development of the textile industry in Turkey and Brazil, leading to a reduction in the direct export of domestic textile and garment products. But polyester, especially filament exports, is on the rise.