By Zhu Yaqiong, www.oilchem.net

Capacity keeps expanding fast

China's synthetic fiber capacity has been expanding in recent years, and the capacity of polyester - the biggest category of synthetic fibers - has been increasing at an annual rate of more than 7%. Among the grades of polyester, the capacity of polyester filament – the dominant grade - has exceeded 40 million t/a, with more than 15 million tons of new capacity started up in the past five years, while over 2 million tons of laggard capacity and policy-dragged capacity were eliminated, leaving the compound capacity growth rate still high at 7.6% (see Figure 1).

Figure 1 China's polyester filament capacity, output, and growth rate, 2013-2023

China's polyester filament capacity has increased by 3.46 million tons year-to-date. The actual production from January to August was 20.374 million tons, only up by 1.541 million tons compared with the same period last year, while the output in the first half saw a year-on-year decline of 1.8%.  

The operating rate of filament capacity gradually bottomed out compared with that of polyester and downstream industries after the Spring Festival in 2022, but was still much higher than the operating rate of downstream texturing, weaving, and printing and dyeing units during the same period (see Figure 2).

    Figure 2 Operating rates of China's polyester filament and downstream units,           2022-2023

By comparing inventory data from recent years, it can be seen that the inventory of filament and staple fiber – two categories with the biggest capacity – has decreased, and the reduction from 2022 to 2023 was especially significant (see Figure 3). At present, the equity inventory of polyester staple fiber is mostly around one week, and the inventory of polyester filament has gradually decreased to less than 20 days from more than 30 days last year. Especially in the polyester filament industry, given the continuous pulse-like trend and supply gluts, suppliers accelerated their sales promotion so as to de-stock.

Figure 3 China's inventories of main polyester categories

Well-performed export market

According to the data on polyester fibers over the past six years, it can be seen that the export volume was quite highlighted. However, in the early stages of the epidemic, sea transportation was restricted between China and overseas markets, so the total export volume decreased. Specifically, the volume in 2020 dropped by 161 300 tons or 4.4% year on year. In 2022, the export volume of major polyester fiber categories increased year on year, especially that of polyester filament. The total export volume from January to July 2023 reached 2.365 million tons, up by 446 800 tons or 23.29% compared with the same period of last year. Figure 4 shows the export trend of China's main polyester fiber products from 2017 to 2022.

Figure 4 Export volume of China's main polyester fiber products, 2017 -2022

Now, the recovery of demand in China is stronger than in overseas markets, especially in the US and Europe where ‘weak recovery’ remains as the key tone. According to customs data, the export value of textile and clothing reached US$27.11 billion in July 2023, an increase of 0.4% month on month and a decrease of 17.7% year on year. Among them, the export value of textile was US$11.15 billion, a decrease of 17.2% year on year, and the value of clothing reached US$15.96 billion, down by 18% year on year (see Figure 5).  Demand from traditional major markets shrank due to gloomy global economic situation this year, so the export volume of Chinese clothing to the original major destinations (the US, EU, and Japan) saw a significant decline. In the meanwhile, the export volume to emerging markets, such as Russia and the five Central Asian countries, countries along the the Belt and Road and some countries in South America and Africa, increased sharply.

Figure 5 China's textile and clothing export value, 2019-2023

Chinese fiber market will be on track to fast capacity expansion in the short term, especially the polyester filament segment with nearly 10 million tons planned to be put into production in the next 3-5 years. In the meanwhile, laggard capacity will be phased out and the industry will see a reshuffle. However, the consumption of consumer discretionary is decreasing amid an economic slowdown, holding back on the demand for textiles and clothing. As a result, the supply and demand are more imbalanced. Southeast Asia, RCEP and countries along the Belt and Road are becoming new growth points of demand, which will usher in a new turning point for China's polyester fiber development.