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China:Oil fuels free fall in polyester
raw materials prices - China market warped |
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2004-12-13
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China : 11th December 2004 |
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For the past seven days polyester fibers prices have been easing out and the trend is expected to continue as oil prices continue declining in the short term.
The decline forced Chinese polyester manufacturers to halt production to stem the decline in polyester prices. The situation turned to worse even as lower cotton prices began to affect the trend at present.
At New York, crude oil for January fell to a three-month low on Tuesday at US$41.46 per barrel, down 26% from the record level of US$55.67 reached on 25 October.
Rebounding to July-August, oil prices will lead to resultant sharp price drop in the petrochemical industry in general, say experts.
MEG prices also registered a drop as not surprisingly, prices of paraxylene and ethylene witnessed free fall on Asian markets in the past days. Paraxylene, a main component in polyester production is widely used for manufacturing Purified Terephthalic Acid (PTA).
Prices of Ethylene, basic to Mono Ethylene Glycol (MEG), the other material used in manufacturing polyester, spectacularly fell in the last week, in face of oil''s price drop.
China''s imported MEG prices decreased on an average to US$ 1,020-US$ 1,030, down 6.30% from last week. Indigenously produced MEG also dropped 900 yuan per ton or 8.18% at 10,100 yuan per ton.
Though less in relative terms, PTA prices registered declined during the same period. Reports say that Chinese polyester groups have rediced their demands on MEG and PTA producers.
About 30% of polyester manufacturing capacities are suspended at present, which astounds in wake of the textile quotas expiry in almost a fortnight and an anticipated rise in global demand for Chinese textiles and apparels.
Stark reality shows far from happy reading for China''s clothing industry which is being burdened with huge stocks. Filament fabrics thus fell in demand, saddling Zhejiang and Jiangsu weavers with unsold fabrics in large quantities. Currently, stocks status stands between two and three months.
Meanwhile, filament yarns prices continued to decline even as demand was weakening, in the past seven days. Prices of polyester staple fibers were also down, further depressed by a new decline in cotton prices. The polyester pipeline is actually anticipating lower prices ahead, therefore reducing its demand whatever the product, from naphtha to garments.
Thus, all that market portends is no sign of rebound but a patient wait for all, coming in the form of expiration of global textile quotas. |
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