By Qiu Qianqian, JLC Chemical
In 2021, the domestic polyester market gradually bottomed out and the market price got recovered steadily. However, under the pressure of high cost, enterprises’ profits slumped in the second half of the year, on the contract to the high profits in the first half. Polyester production capacity decelerates in light of saturated market resources and increasingly fierce competition. The shortage of containers and the surging of global sea freight have also led to the decrease of polyester products export. Great impact has been made to the entire polyester industry chain under the national dual control and electricity restriction policy.
Stable growth of polyester production capacity, rapid development of bottle-grade PET, largest proportion of polyester filament yarn
In recent years, with the development of the national economy and continuous growth in social demand, domestic polyester PET production continues to grow. As the main raw material for the textile industry and beverage packaging industry, the rapid development of which are the main driving force for the soaring of the polyester production capacity. In order to meet the domestic and foreign textile and garment market demand, the production of China's textile industry has continued to expand in recent years. Figure 1 shows the ratio of polyester-related products production capacity from 2017 to 2021. As shown in the Figure 1, during 2017-2021, the highest average annual growth rate is domestic PET bottle chip, which mainly dues to the healthy development of domestic beverage demand in recent years. Polyester filament yarn (PFY) ranks the second place, while the polyester staple fiber (PSF) and polyester chip grade and film grade are relatively slow. From the prospective of comprehensive production capacity, polyester production capacity has decelerated, and some backward production capacity has been cleared along with the deepening of the national supply-side reform. However, in 2018, domestic polyester production capacity entered a new development period. Several new production lines was put into operation at the same time and the average annual growth rate of production capacity was as high as 11.2%. In 2019, the domestic polyester production capacity returned to the slow development track. During this period, the industry overcapacity reappeared, the new production capacity plummeted, and the average annual growth rate of production capacity slumped to 7.19%. In 2020, the new production capacity went normally, and the average annual growth rate of production capacity was 6.18%. In 2021, the average annual growth rate of production capacity was 5.24%. The polyester production capacity totalled about 67.325 million t/a as of 2021.
Figure 1 The ratio of polyester-related products production capacity from 2017 to 2021
Relative balance of the domestic supply and demand, and more development potential to be released
In recent years, with continuous growth in social demand, China's polyester production capacity has continued to increase. As the main raw material for the textile industry and beverage packaging industry, the rapid development of which are the main driving force for the soaring of the polyester production capacity. In order to meet the domestic and foreign textile and garment market demand, the production of China's textile industry has continued to expand in recent years. The rapid development of the textile industry has become the biggest driving force for polyester industry. China's soft drink market is expanding as well, but as the market becomes saturated, the growth rate has gradually slowed down. In 2017, negative growth occurred in soft drink market for the first time, however, the industry got recovered gradually in 2018. Then China’s soft drink industry has entered a short adjustment period, but the prospects are still very optimistic. The development of the beverage industry has promoted the continuous growth of the market capacity of bottle grade PET.
As shown in Figure 2, China's polyester production capacity increased from 50.55 million t/a in 2017 to 68.325 million t/a in 2021, with an average annual growth rate of 7.27%. From 2015 to 2017, domestic polyester production capacity decelerated, with an average annual growth rate of 4.48%. 2018-2019 reached the peak of polyester production, with a total of 12.1 million t/a new production capacity. From 2020 to 2021, the domestic polyester production capacity sustained steady growth. However, the industry re-experienced overcapacity crisis, so the new production capacity slowed down. From January to November 2021, there was an increase of 4.77 million t/a production capacity in total and 420 000 t/a of backward capacity got cleared. The production capacity growth rate was 6.80% in general. The apparent consumption of domestic polyester products is also increasing year by year, with an average annual growth rate of 9.87% or so. It is expected that the consumption could reach about 50.6 million tons by 2021.
Figure 2 Statistics of China's polyester apparent consumption 2017 to 2021
In conclusion, the domestic polyester industry in recent years has maintained relatively stable growth both in production capacity and output. The utilization rate of production capacity was relatively high. The market demand has remained stable, the supply and demand side was relatively balanced, and the market still has great development potential in the future.
Polyester factories in 2021 had good production and sales condition, the inventory was stable and the profitability was strong
In 2021, the production and sales performance of polyester factories was acceptable, and their inventory was relatively stable. Figure 3 is the production, sales and inventory trends of polyester products in 2021.
Figure 3 The production, sales and inventory trends of polyester products in 2021
In 2021, polyester enjoyed relatively strong profitability. However, the profitability of fiber-grade PET enterprises fluctuated widely, which was reasonable in the first half, but suffered long-run loss in the cash flow in the second half. Figure 4 shows the profit trend of polyester products in 2021.
Figure 4 The profit trend of polyester products in 2021
According to statistics, the average annual profit of fiber-grade PET was about RMB49/t in 2021, decrease of 65.25% YoY, compared with the average annual profit of RMB141/t in 2020. The overall profitability of bottle-grade PET companies dropped a little bit compared with 2020. The average profit of domestic companies was RMB115/t this year, down 65% YoY, compared with the average profit of domestic companies in 2020. PFY enterprises owned good profits, being the most profitable one in polyester. Among them, the average annual profit of POY was RMB469/t, up 486.25% YoY, compared with the average annual profit of RMB80/t in 2020. The average annual profit of FDY was RMB293/t, an increase of 163.96% YoY, compared with the average annual profit of RMB111/t in 2020. The average annual profit of DTY was RMB645/t, an increase of 174.47% YoY, compared with the average annual profit of RMB235/t in 2020.
Forecast on the development of polyester industry
In the next few years, China's polyester production capacity is showing a growth trend, of which the expected growth rates are 13.51%, 5.42%, and 4.28% respectively from 2022 to 2024, as you can see in Figure 5.
Figure 5 Comparison of polyester production in 2021-2024
Bottle-grade PET: In the next few years, China's bottle-grade PET market will maintain a steady growth trend in supply side. In 2022, Wankai New Material Co., Ltd. phase II unit with a capacity of 600 000 t/a and Sichuan Baosheng Group new unit with 500 000 t/a will come on line. Yisheng Dahua Petrochemical Co., Ltd. is expected to have new capacity of 500 000 t/a and 800 000 t/a in Dalian and Hainan respectively. From 2023 to 2024, Yisheng Dahua will increase its production capacity by 1.2 million t/a in Hainan; Sinopec Yizheng Chemical Fibre Co., Ltd. will increase 500 000 t/a; Tongkun Group will increase 600 000 t/a; Shanghai PRET Composites Company will increase 300 000 t/a and Jiangsu Sanfangxiang Group Co., Ltd. phase I unit with a capacity of 700 000 t/a will be put into operation. In the future, the number of large-scale bottle chip factories will increase. There are several projects are under active planning including Pan-Asia PET Resin (Guangzhou) Co., Ltd. with 1.2 million t/a production capacity, Jiangsu Sanfangxiang Group bottle chip unit with 3 million t/a capacity, Tongkun Group with 1.2 million t/a capacity, and Yisheng Dahua new unit with 1 million t/a and Far Eastern Manufacturing Company new unit with 1 million t/a. The production capacity of leading bottle chip enterprises will continue to expand, and the market share will be more concentrated in the future .
Fiber-grade PET: On the supply side, the fiber-grade PET in China is expected to increase in tight range in the next three years. Then the supply would sustain stable due to the slow-growth of downstream production capacity. From 2022 to 2024, several new units are expected to come on line, including Tianlong New Materials with production capacity of 200 000 t/a, Xinfengming Group Co., Ltd. with a capacity of 300 000 t/a and Hengli Group with a capacity of 600 000 t/a. But most of the new units are the shared production capacity between PET chips and film, and multiple sets of new unites have side-cutting capacity of fiber-grade PET. This year, the downstream chip spinning factories of fiber-grade PET have been highly operating. However, in recent years, chip spinning filament factories have abandoned conventional white filaments and began to devote themselves to the production of differentiated filaments, such as colored filaments, cationic filaments, flame-retardant filaments, composite filaments, etc. In addition, raw chips are bound to have a certain substitution effect on recycled PET. The proportion of fiber-grade PET in the recycling field has remained firm. Secondly, with the rapid development of the film industry, the market demand for high-end fiber-grade PET will also grow steadily. Therefore, it is expected that the production capacity of fiber-grade PET may increase in a tight range from 2022 to 2024.
Polyester staple fiber: It is expected that the production capacity of the PSF market will continue to rise from 2022 to 2024. But the production will not be as same as in 2021 when the most of the production lines were small-scale, and most of them are the units with production capacity of 100 000 t/a and below 100 000 t/a. However, from 2022 to 2024, most of them will be large-scale production lines, with multiple units with a capacity of above 300 000 t/a. The annual production capacity will reach 12.35 million t/a by 2023, and 12.75 million t/a by 2024. Most of them are differentiated staple fibers, which are highly competitive. Although PSF has good profits in recent years and the factory is highly operating, the supply pressure in the future cannot be underestimated. In terms of import and export, with vaccination in various countries, it will be of great help to the recovery of the economy. In addition, as shipping freight go back down, export costs will be reduced, and foreign orders will gradually return to normal. Downstream spinning factories still have a lot of production capacity, and PSF still shows a relatively healthy state among PET varieties.
Polyester filament yarn: In recent years, as the demand in the textile industry is becoming stable, the increase of PFY production may be limited in the future, and the expansion has slowed down. According to incomplete statistics, from 2022 to 2024, the production of PFY is expected to increase around 8.4 million t/a, and the domestic production capacity may exceed 45 million t/a. The new production capacity still mainly comes from leading enterprise’s self-planning, industrial chain improvement, etc. From the perspective of the specific year of production, the new production capacity is mostly concentrated in 2022. The production of PFY is expected to increase by about 5.1 million t/a in 2022, with an increase of 14%. The increase mainly comes from the expansion of leading enterprises, among which Tongkun Group will increase 1 million t/a; Hengyi Group will increase 600 000 t/a; Hengli Group will increase 550 000 t/a; Rongsheng Group will increase 500 000 t/a; and Xinfengming Group will increase 300 000 t/a. From 2023 to 2024, the overall growth rate will slow down to 3% to 4%, of which the new production capacity is expected to increase only 1.8 million t/a in 2023, and 1.5 million t/a in 2024. From the perspective of industry concentration, in the next few years, PFY industry will be further concentrated, the upstream and downstream industrial chains of leading enterprises will be further improved, and the development of group companies and industrial chain are becoming the trend which is expected to continue in the future.
