POLYESTER STAPLE FIBER (PSF) DOWNSTREAM SECTOR DURING APRIL/MAY 2011

Tight monitory policy has reduced the final demand for apparel in China and the inventories have grown to over 20 days.  The utilization rates are not very low, but they have fallen from the high 90’s to 85% currently.  Cotton grade 329 fell from Rmb 32,000/ton to Rmb 30,000 /ton maintaining a premium of Rmb 16000 over polyester.  This premium has ensured substitution to polyester.  It would be interesting to review the impact of cotton pricing on polyester and aslo noteworthy to understand how cotton market change as December 2011 futures stand at 1.26 cents/lb, down from record actual of $2.1102 /lb experienced recently in March.  Lower cotton futures would negatively impact the polyester prices.  Taiwanese producers have been able to maintain operating rates at 95%, but the domestic demand has remained a little quiet during April with the hope that pricing may come down further in the near future. 

In the US and Canada, cotton substitution is taking place at a rapid pace. Utilization rates for RPET and Virgin PET have increased to more than 100% and one producer is considering bringing up a long idled polymerization and extrusion plant online.  Import substitution has been going on, with low-melt and conjugate fibers being manufactured indigenously.  In the apparel sector retailers and brand houses are moving some of their Asian outsourcing back to CAFTA region.  Fiberfill and non-woven sectors are also on the rise.  Due to BCF shortage, substitution has come from polyester staple fiber.  Keeping in perspective this good downstream demand, staple producers announced a 7cents/lb increase, but due to customer resistance to this increase, a more modest increase has been sought.  Price stability is seen as the summer season approaches, which would also be helped by the PET demand in the beverage sector.  In Europe, market for hygiene and wet wipes remains strong.  Automotive sector demand remains quite strong as well.  Demand of polyester in construction and roofing sector has also improved, but demand from geotextiles and fiber fills remains flattish.