Polyester chips are mired in losses

[168TEX News] In recent times, the market situation of various upstream raw materials has declined weakly compared to the previous period. Amid the weakness of various raw materials, the overall polyester chip market is also in a weak state. It remains weak, with sluggish transactions and continued weakness in prices. The entire market can be described as an atmosphere of sluggishness. The volume and price of the polyester chip market continue to be in a weak state, and manufacturers have a strong mentality of shipping. This is mainly due to the increased mentality of cashing in at the end of the year. However, market merchants still have little confidence. A few days ago, manufacturers in the Jiangsu and Zhejiang semi-glossy slice market quoted prices at RMB 5,300-5,450/ton (cash). The actual transaction price was slightly lower, and some manufacturers were selling at low prices. At the beginning of the month, manufacturers in the Jiangsu and Zhejiang semi-glossy slice market quoted prices at 5,750-5,850 yuan/ton (cash), but in just half a month, the price has dropped by about 400 yuan/ton. So what is the cash flow situation?

Generally speaking, the cost price of polyester chip products = (0.86*PTA+0.34*MEG) + the processing cost of each product. Calculated based on the current raw material data, the actual negotiated price in the PTA market is mostly concentrated at 4,225 yuan/ton, and the mainstream quotation in the MEG market is concentrated at 4,370 yuan/ton; from this we can calculate that the cost price of polyester chip raw materials is approximately 5119 yuan/ton. In addition, we need to add other processing fees and production costs. For state-owned enterprises, the calculated processing cost is 610 yuan/ton, and the total manufacturing cost is 5,729 yuan/ton. It can also be calculated that the processing cost of private enterprises is 450 yuan/ton, and the total manufacturing cost is 5569 yuan/ton. At present, the mainstream price of polyester chips is 5,250 yuan/ton, which means that state-owned enterprises will lose more than 400 yuan/ton, and private enterprises will lose more than 300 yuan/ton.
Throughout the year, in most cases during the year, the price of polyester chips continued to decline, and companies lost more and made less. Looking back on the past, the price of polyester chips from 2012 to 2013 was around 10,000 yuan. In 2014, the polyester chip market was dragged down by the collapse of crude oil, and prices continued to bottom out. According to statistics, the average profit of domestic polyester chips from January to November 2015 was -136 yuan/ton. Most industry players have pessimistic expectations for the market in December. It is expected that the cash flow of chips will be difficult to reverse the loss situation, so the profit level for the whole year will still be is a negative value, it can be said that the polyester chip factory was really busy in vain in 2015.
At the end of November, the operating rate of downstream chip spinning dropped again. At present, the overall operating rate is only 40-50%, resulting in a weakening of the consumption capacity of semi-glossy slices. It can be said that since December, the downstream of slicing has been basically lifeless, and the daily trading volume is not much different. Then manufacturers’ inventories will rise, which will lead to the phenomenon that some manufacturers with high inventories will lower their prices in order to ship goods. However, this approach does not have much effect. At present, in addition to the low start-up of chip spinning, crude oil is weak, PTA short selling and the news of the Federal Reserve raising interest rates are all leading to a weakening market outlook. At present, downstream companies do not dare to restock large quantities of stocks, and the demand for polyester chips remains at a rigid level.
Taken together, although there have been no major new or expanded production projects for polyester chips in recent years, the demand has shrunk sharply, and the melt direct spinning process has become increasingly mature, taking away part of the chip spinning market share. As the main raw material, polyester chips are in demand. Decline accordingly. However, there are no new application fields in the short term, and demand growth in other traditional consumer fields is slow, which will eventually lead to the continued bottoming of polyester chip prices and gradual cash flow losses. Industry reshuffle may be inevitable.