Polyester Industry Suffered Losses on Rising Feedstock

In the first quarter of 2022, the prices of the polyester industrial chain rose to varying degrees, but there was a large loss of profits behind the rise. It reflected that the rise in the price of crude oil did not completely transfer to the polyester industry chain.
The feedstock prices gained more than downstream product prices.
From the price operation of polyester industry chain, the increase in feedstock prices exceeded that in polyester products prices. It can be seen that the demand pressure faced by the middle and lower ends of the industrial chain makes the price rise less powerful than the raw material market. One of the important driving factors of this round of industrial chain price rise was the continuous rise in crude oil price. In the first quarter, WTI and Brent prices once exceeded the high of $130/bbl. The rise in crude oil price drove the price of polyester industrial chain products to rise. Among them, the increase of PX reached 26.48%, that of PTA reached 15.56%, and that of downstream polyester was 3% - 8%.

                 2022 Q1 Polyester Industry Chain Monthly Average Price Comparison

Product	Unit	Jan	Feb	Mar	Q1 Change
PX	$/mt	963	1,086	1,218	+26.48%
PTA	RMB/mt	5,270	5,573	6,090	+15.56%
MEG	RMB/mt	5,190	5,079	5,212	+0.42%
PET chip	RMB/mt	6,707	7,011	7,249	+8.08%
Bottle-grade PET	RMB/mt	8,102	7,985	8,348	+3.04%
polyester filament	RMB/mt	7,690	8,100	8,179	+6.36%
polyester staple fiber	RMB/mt	7,410	7,653	7,846	+5.88%

In terms of the supply side, the supply of MEG, PX and polyester filament all showed notable increased in the first quarter of 2022, which was closely related to the rapid capacity growth in recent years. Thereinto, the MEG price only increased by 0.42% due to its large supply, which was the smallest increase across the polyester industry chain. Meanwhile, on a year-on-year comparison, the increase in bottle-grade PET, polyester filament and polyester staple fiber prices was also limited weighed by supply increment.

             2022 Q1 Polyester Industry Chain Output Comparison

Product	Unit	Q1, 2021	Q1, 2022	Q1 Change
PX	kt	5,074	5,584	+10.05%
PTA	kt	13,145	13,630	+3.69%
MEG	kt	2,656	3,556	+33.88%
PET chip	kt	2,026	2,021	-0.25%
Bottle-grade PET	kt	2,460	2,645	+7.52%
polyester filament	kt	8,860	9,727	+9.79%
polyester staple fiber	kt	1,814	1,842	+1.54%

Downstream products fell into losses on poor value chain transmission

The gain in crude oil price would definitely push up the production cost of downstream products, and the poor value transmission made the profit of the polyester industry chain continue to shrink in the first quarter. According to the theoretical profits, polyester filament, PX, PET chip, polyester staple fiber and PTA producers all suffered profit losses in March, and only bottle-grade PET enjoyed considerable margins, which was in line with the rising export demand. Other products couldn’t follow up the rise in feedstock prices, which weighed on the overall growth of the polyester market prices.
In April, the crude oil price is expected to remain high and volatile, but the global situation may bring downward pressure on oil prices. It is predicted that the terminal demand will pick up, and this may alleviate the profit loss of the industry chain market. However, since the crude oil supply will not increase significantly in the short run, the oil price still underpins the feedstock PX price. Whether terminal manufacturers can raise production in the upcoming peak season, so as to drive the effective transfer of inventory in the industrial chain, is a key factor worthy of market attention.