Ｒｉｇｈｔ Ｔｉｍｅ ｔｏ Ｉｎｖｅｓｔ ｉｎ ＭＭＦ？

The textile industry in China is continuing to expandat a record pace. In June， the output of man-madefiber reached a record of 2.13 million tons， up by20.77% compared with the same time of the previous year， andwith a rise of 4.53% against May， representing a new all-timemonthly output record.

Meanwhile， the sound performance are achieved bydomestic viscose fiber and polyurethane fiber enterprises:the profit of Xinxiang Chemical Fiber Co.， Ltd. (000949)increased by 500-600%， Shandong Hailong (000677) surgedby 200-300%， Jilin MMF Group (000420) ascended with a netprofit of 80 million Yuan， Shuka Stock (000584) predicted togrow by 3300-3600%， and so on. Although the MMF marketin the following quarter and， maybe till the end of this year，would perform well and effectively， the growth margin wouldfall continuously without doubt.

Recently， the profit of polyurethane and viscose filamentand staple enterprises is lowering， due to the falling priceof products. According to the statistics， the price index ofpolyurethane is 81，500 Yuan， down by 14.2% comparing withits peak price， which could reach 95，000; correspondingly， theprice of V.F and V.S is 34，000 Yuan， and 20，100 Yuan， droppingby 700 Yuan and 650 Yuan， respectively， comparing with thehighest price.

However， the market has witnessed a decline of the priceof MMF products， while the raw materials are still keepinga high level of price.Of them， the price offilament 1inter pulp forviscose fiber increasedfrom 3，000 Yuan in early2007 to 12，000 till now;the price of staple cottonpulp reached 11，500Yuan， nearly 3，800Yuan higher than that ofthe early year; the rawmaterial of polyurethanePTMEG and MDI comeinto the market with the price of 32，000 Yuan and 125，000Yuan， increasing by 1，800 Yuan and 3，300 Yuan， respectively，compared with that of the early 2007.

Three elements could be considered as the main effectivefactors for the prosperous market nowadays:

Due to the low price of products， during 2004 and 2006，most MMF enterprises gained less profit leading to a decreaseof market supply of MMF products， so that the market pricerebounded sharply at that time;

Export became more effectively. The polyurethanerealized a proportion of 20% of the total consumption amount，of which the viscose staple and filament took around 10% and40-50%， respectively;

Domestic demand increased stably， and the market priceascended along with the increasing domestic textile industrialbenefit.

According to MMF industrial analyst， the soaring priceof polyurethane and viscose filament staple would not lastcontinuously 'in the second half year. During the next sixmonths， the market supply would exceed the demand， alongwith the high production capability， resulting in a droppingprice of MMF products. Besides， the lasting high price ofcrude oil would not allow a decrease of the price of MMF rawmaterials， so that the downtrend of raw material price wouldbe slower than that of the products， and it is hopeless to gainmore profit during this time. Furthermore， since July 1st， thedescending VAT would affect the export of MMF productsdirectly and seriously.

It is estimated that， through July and August， the MMFindustry in China would suffer its traditional time of weakmarket demand， and the price of the polyurethane and viscoseproducts would keep declining unhappily; till this September，it is expected that the price of those MMF products couldrebound as the demand come round， however， confronting ahuge production capability at the same time， the price wouldonly maintain stable slightly; since December， the MMFmarket would present a downturn again， and the price wouldgo on declining consequently.

(Source: SINOLINK SECURITIES)