Inventory cycle has a say on polyester marketInventory cycle has a say on polyester market2017-06-14 Domestic macro-economy weighted on polyester market till now this year. The Central Bank tightened liquidity and intensified regulation and deleverage. Bullish commodity market seemed to be a thing of past. Crude oil market also presented not positive. Oil production cut-down agreement was extended, yet the price still retreated to level before the agreement was reached. Polyester market price thus declined on the whole in the first half of 2017.  Polyester production in 2016 totaled 36.8 million tons, a year on year growth rate of around 4%, yet as inventory sharply dropped by over 1 million tons, demand growth hit as high as 9%. This was to much extent credited to surging commodity market in the fourth quarter of 2016. Without the incentive, demand growth may reach around 5% and production increase much lower.  Unfortunately, such a high growth in demand could not sustain in 2017. Yet as the industry started the year with a good condition, plants inventory though accumulated due to sustained high run rate, shows moderate now after the digestion in industrial high season.  It is estimated that polyester operating rate in Jan-Jun averages around 85%. In the second half 2017, given cautious market sentiment towards demand and accumulated inventory as well as pressure from expected new online units, an estimated 83% of run rate would possibly mean around 8% growth of polyester production. Presume that polyester plant inventory sustain at current level, demand growth may reach below 3% even production is calculated at 39.6million tons (Practical volume may be lower). Thus it is not necessary that industrial demand outweighs the impact from macro-economy, but that inventory cycle has quite big influence on the market. Looking ahead, demand in the second half 2017 seems not very positive. And macro factors may gradually show muscle over demand in real economy. A close attention to industrial development thus is recommended. |