As the war situation changes, the global market oscillates. Affected by the situation in Russia and Ukraine, the market’s risk aversion sentiment has increased, driving the rise in commodities and safe-haven assets such as oil, natural gas, gold, and silver.
When trading opened on February 28, international oil prices rose sharply. Brent crude futures rose $5.46, or 5.6%, to $103.39, having hit a high of $105.07 a barrel shortly after the opening.
On the 28th, the polyester factory started promotion again and issued a notice: taking into account the average melt price cost of the current month and the inventory cost of polyester filament, the polyester company will continue the promotion for one day at the last promotion price today, and the discount will be canceled starting tomorrow.
While international oil prices continue to rise, polyester factories choose to continue promotions at this moment. Why is this?
1Polyester stock remains high
In fact, polyester filament yarns have been on sale for many days since mid-February. The reason for the sales promotion at that time was obvious, as polyester yarn stocks had reached a high point. After about half a month of promotion, although the production and sales of polyester yarn have increased, the inventory has not been alleviated. According to data monitoring from China Silk City Network, the current overall inventory of the polyester market is concentrated at around 26 days, an increase of 0.5 days from February 15.
The inventory of polyester yarn lasts for 26 days. This data has caught up with the level of August last year, which was the weakest season in the industry throughout the year. Taking into account the off-season in the downstream, it is understandable that polyester stocks are high. However, the current downstream market is not in the off-season stage. On the contrary, it is about to usher in the traditional peak season. In such a downstream situation, polyester stocks are still at a high level, and a sense of crisis arises in polyester factories. At present, the tactics that polyester companies can deal with are still more conventional methods such as “price reduction promotion”.
2Polyester profits are on the verge of loss
Accompanying high inventory is low profit for polyester yarn. After November last year, as the price of polyester filament fell, the profit of polyester filament also began to plummet. Especially in January this year, the profit of polyester filament returned to a loss predicament from the original profit state. Fortunately, even if the loss is stopped, the current profit is still low.
For weaving companies, whether polyester prices are promoted or not has little impact. What has a big impact on them is the sharp rise and fall in prices. At present, weaving enterprises are still in the process of gradually restoring their operating rates. According to data from China Silk City Network, the operating rates in Jiangsu and Zhejiang have risen to about 64%, an increase of 6% from last week. The start-up rate is rising and is at the same level in previous years, but the enthusiasm of downstream buyers to buy polyester yarn has not been high because they are worried that polyester yarn prices will rise and fall sharply. Although today’s polyester prices are not at the highest point, they are still at a high level, while the price of gray fabrics has always been at a low level. It can be said that the gray fabrics of weaving companies are sold at a guaranteed cost. Therefore, changes in the price of raw materials will directly affect profits, so manufacturers should be cautious. Within reason.
Judging from polyester prices, polyester filament is more likely to rise in the near future. At present, the cost side will still dominate. The outside world is worried that a conflict between Russia and Ukraine will affect the global energy supply, which will stimulate a surge in crude oil prices. Some institutions predict that crude oil prices may once again exceed the $140 mark. The relations between Russia and Ukraine are unlikely to be eased in the short term, and oil prices are more likely to fluctuate at high levels. Moreover, the polyester factory has also clearly issued a message that it will start to cancel the discounts in March. Even if it is difficult to increase significantly due to the constraints of inventory and demand, it may be difficult to have promotions in the short term. Therefore, the promotion on the 28th is just the right time for downstream weaving companies in need, but for companies that stock up on bargains, they will not suffer any loss if they buy.
Although there is a high probability that polyester yarn prices will rise due to cost-driven prices, we cannot relax our vigilance. First of all, crude oil may also rise and fall, failing to reach a higher point. Secondly, in recent years, geopolitical conflicts have continued and the future world situation is uncertain, which will have an unpredictable impact on the industry. Furthermore, the epidemic is still continuing and market demand has been shrinking. There is always a big test for terminal demand. To sum up, negative factors are still surrounding.
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