Chemical Fiber Sector Remains in A Period of Growth in 2011

By Zhang Yongqing, China Chemical Fertilizer Industry Association Information Center

2010: Being sound on the whole

Output: stable increase

The output of the chemical fiber sector in China was 25.1216 million tons from January to October 2010, an increase of 14.10% over the same period of the previous year. The output was 7.875 million tons in the third quarter, an increase of 9.8% over the same period of the previous year and the growth was 3.0 percentage points lower than the previous quarter. The output in the third quarter had an increase of 1.7% over the second quarter and the growth was 2.3 percentage points lower than the previous quarter. Due to impacts from the implementation of energy conservation and emission reduction and the elimination of outdated capacity, there is a considerable possibility that output was reduced in the sector in the fourth quarter.

Export: rapid restoration

China's export of chemical fibers increased rapidly in 2010. The volume was 1.5832 million tons from January to October – a growth of over 35%. The net export volume reached 861 700 tons in that period. The export value of the chemical fiber sector was USD4.91 billion in the third quarter of 2010, an increase of 32.4% over the same period of the previous year and growth was 1.7 percentage points higher than in the previous quarter. The export value in the third quarter increased 13.0% over the second quarter and growth was 10.6 percentage points higher than in the previous quarter.

Profit: drastic upgrading

The profit of the chemical fiber sector in China from January to October 2010 increased 1.28 times over the same period of the previous year and the gross profit rate was 9.01%. The rate of total expenses (the sum of operating expenses, overhead expenses and financial expenses) was 4.34% and the profit rate was 5.19%. The total profit of the chemical fiber sector was RMB6.21 billion in the third quarter of 2010, an increase of RMB490 million over the second quarter. The rate of losing enterprises was 13.4%, being 1.2 percentage points lower than the second quarter and the coverage of losing enterprises was further narrowed. The total loss in losing enterprises was RMB500 million, an increase of RMB280 million over the second quarter.

Output/sales rate: high level

The output/sales rate of the chemical fiber sector in China was 98.07% from January to October 2010. The operating rate was also maintained at a high level. With the power supply restricted in major producing regions such as Jiangsu and Zhejiang, the operating rate in the first half of 2010 was higher than the second half of the year. The product sales revenue of the chemical fiber sector was RMB124.07 billion in the third quarter of 2010, an increase of 18.8% over the same period of the previous year and the growth was 8.9 percentage points lower than the previous quarter. The product sales revenue in the third quarter had an increase of 2.8% over the second quarter and the growth was 8.9 percentage points lower than the previous quarter.

Market behavior: shift from cost-driven to demand-driven

In 2008 and even in the first half of 2009 the market trend of mainstream chemical fibers basically followed price changes of raw materials. From the second half of 2009 to the end of 2010, however, the chemical fiber market in China started to rebound and the market trend became demand-driven. Seasonal features were however still evident in the market and there was also more market speculation.
   The most dramatic variety in the chemical fiber market in 2010 was polyester fiber and especially polyester staple fiber. The market of polyester staple fiber lingered in a narrow range in the first 8 months and the price was kept on the low side especially in July and August. Starting from mid-September, however, the market had a breakthrough and the price went way up, hitting a new high almost each day. The price increased by a total of RMB3 000 per ton by the end of September and the beginning of October. The market of polyester staple fiber started a readjustment in October and the price fell slightly in November. When there was an awareness of slackness, the market suddenly made an outburst. In the week starting from November 6th the price of polyester staple fiber increased at a rate of over RMB1 000 per ton a day. A new offer appeared almost every other hour in the market. In a matter of one week, the price of polyester staple fiber reached more than RMB20 000 per ton with a growth of over RMB7 000 per ton. By November, the price had doubled since September when it first started to increase. Starting from November 12th, however, the market changed direction in the blink of an eye and the price dropped precipitously. By the end of December the price reduction margin became smaller, but there were no evident signs for the price to stop falling.
   Such price changes were closely related to the market of raw materials futures and the demand increase in downstream enterprises. The dramatic scene was however the result of market speculations. In the second half of 2010, due to a supply shortage the market price of cotton climbed until it had doubled. The role of polyester staple fiber to replace cotton was strengthened. It was therefore only reasonable for polyester staple fiber to have a rational price rise.
   In drastic price ups and downs of polyester staple fiber in the past 3 months, the varieties that benefited most were viscose filament fiber and polyamide filament fiber. In the first three quarters of 2010, the price curves of viscose filament fiber and polyamide filament fiber were very flat with no great increases or reductions, indicating that the market was relatively stable. Pushed by the stock market, the futures market and the price rise of related products, their prices also had a considerable increase in the fourth quarter. Nevertheless, at a time of drastic price reductions for other varieties such as polyester fiber, the market of viscose filament fiber and polyamide filament fiber remained relatively stable. Three points were reflected in the situation. First, the downstream shift of cost in these two varieties was quite successful. Second, these two varieties were a distance away from cotton, which had became the focus for market speculation. Third, the market of these two varieties was still cost-driven.
   The market of acrylic staple fiber and polyurethane fiber was much the same as the market of polyamide fiber. Price ups and downs were even bigger because price changes of their raw materials were more frequent and the raw material cost is a considerable proportion of the production cost of these two varieties.

2011: remaining in a period of growth

For a considerable period of time to come, conditions in the world, in China and in the chemical fiber sector itself will be favorable to the development of the sector. Impacts from the global financial crisis will be further relieved around the world, and the economy will be further rehabilitated. Sustained growth of China's foreign trade will therefore be promoted.
   The chemical fiber sector in China will highlight the growth of quality and profit during the Twelfth Five-year Plan period. Technical progress and product development will become the mainstream. Breakthroughs will be made in advanced material and biological sectors. It is expected that in such a favorable environment the chemical fiber sector in China will continue to grow in 2011.
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