Status quo of China’s chemical fiber industry in the first three quarters in 2018

During the first three quarters in 2018， the international oil price rises and then appears a high shock， which forms a huge pressure on chemical fiber industry cost and pushes up the price of chemical fiber market. The growth of economic benefits of the whole industry boosts month by month on year-on-year basis， the profit and growth for the third quarter enhance on year-on-year basis， and the whole industry runs soundly. The running of various sub-industries is differentiated and continues the situation of polarization in the first half of the year. Besides， polyester and polyamide industries are in sound running condition， while viscose fiber， acrylic fibers and spandex industry run difficultly.

Basic information of industry operation

Supply and demand

According to the statistics of State Statistics Bureau， the chemical fiber production from January to September has reached up to 37.4145 million tons， with a year-on-year growth of 8.42%. Among them， the yield of polyester is 29.102 million tons， with a year-on-year growth of 8.95%； the yield of polyester is 2.5413 million tons， with a year-on-year growth of 5.93%； the yield of viscose staple fiber is 2.8158 mil-lion tons， with a year-on-year growth of 4.97%.

The production and marketing of polyester and nylon industry present flourishing， of which the highest rate of operation in polyester industry is more than 90%， and the rate of operation in slack season also remains more than 80%， the average rate of operation is at relatively high point for recent two years. However， the rate of operation of viscose industry and acrylic fiber industry declines in volatility， of which the average rate of operation in acrylic fiber industry is less than 70%， the rate of operation for the two industries is at relatively low point for recent two years.

From the perspective of demand side， the downstream demand increases slightly on year-on-year basis. The outputs of main downstream products of chemical fiber have different degrees of growth， the rate of operation of the downstream industry obviously increases on year-on-year basis. The total volume of textiles city rise substantially in slack season （July and August） on year-on-year basis， which results in a low inventory status of polyester， nylon industry compared with the corresponding period last year. However， in light of the active demand in slack season， the quantity demanded in peak season （September and October） is overdrawn， which may cause the rising inventories of some manufacturers in peak season.

Market

Under the influence of rising price of bulk commodity and the pushing effect of the cost， the price of chemical fiber products is higher than that of the same period last year， of which polyester filament increases significantly. However， PTA price in Sep- tember falls from a high point， and the demand in peak season also falls short of expectations， thus the price of polyester products also falls. The market conditions of each sub-industry are obviously differentiated and continues the situation of polarization in the first half of the year. However， the promoting effect of cost has faded and capacity pressures still remain.

Performance

During the first three quarters， the main business income and total profit of chemical fiber industry gradually increase on year-on-year basis. Since May， the total profit is reversed from negative growth to positive growth. According to the statistics of State Statistics Bureau， the chemical fiber industry has received main business income of 590.9 billion Yuan from January to September， with a year-on-year growth of 14.35%； the total profit is 28.505 billion Yuan， with a year-onyear growth of 22.34%. In addition， the scale of losses of industry has reached to 20.47%， with a year-on-year growth of 6.03 percentage point， the amount of loss for unprofitable firm increases 39.42% on year-onyear basis. The scale of losses， amount of loss and profit margin of the industry promote simultaneously， indicating the enterprise profitability continues to be polarized.

The operation quality of chemical fiber industry is generally sound. The profit margin of chemical fiber industry from January to September 2018 is 4.82%， which has an increase of 0.31 percentage points over the same period last year. The turnover speed of total assets is accelerated， the ratio of three fees is reduced， while the turnover rate of finished products decreases. The increase of industry profit， from the perspective of market level， is mainly due to the rise in product prices and the follow-up of downstream demand； however， the basic reason is that supply-side structural reform has achieved some achievements and the supply-demand relationship has been improved； furthermore， new product development is also accelerating， the brand， quality and varieties have been promoted.

Main factors that influence chemical fiber industry operation

International oil price

Political risk and supply fluctuation result in the rise and fluctuation of oil prices， which hits new high unceasingly. The oil price for three quarters hits new high， which falls back in October.

Capacity

Industry investment enthusiasm is relatively high driven by good benefit， the growth of fixed-asset investment in chemical fiber industry continues the rebound trend of the last year， with a year-on-year growth of 31.9%； the growth rate is 13.9 percentage points higher than the same period last year. According to incomplete statistics， the new capacity of polyester in the first three quarters is more than 400， ten thousand tons（including restart of partial long-stop device）. Among them， bottle grade is about 1.1 million tons， which is mainly launched in the first half year， the new capacity decreases in three quarters. At present， the market has basically entered into the adjustment stage， the early release of capacity still has a huge impact on the industry.

Currency

The RMB exchange rate soars to a 16-year high， the afternoon market is expected to fluctuate on high level. Although the depreciation of RMB is favorable for export， the direct export of chemical fiber products still has low proportion. However， chemical fiber industry has high import dependence on raw materials， PX， MEG and wood pulp maintain more than 50% import dependence， hence， the depreciation of RMB will increase the import cost of chemical fiber raw materials.

Sino-U.S. trade friction

With the escalation of Sino-US trade friction， chemical fiber industry chain is almost all involved. In the short term， it has slight direct influence on import and export of Chinese chemical fiber and huge impact on some products in some industries. Besides， its impact on export of Chinas textile industry will indirectly influence the market confidence of chemical fiber industry. In the long term， the import transfer of America may accelerate the development of competing countries and influence the international competitiveness of chemical fiber industry in China. However， we can think it from a different angle， challenges are also opportunities， and thus the industry will focus on high-quality development and“internal competitiveness”.

Industry trend forecast in the fourth quarter

The macro environment remains generally stable， domestic demand growth will become the absolute main force that drives the development of textile industry. However， downside risks cannot be ignored， the international trade environment is becoming more uncertain， which increase the concerns among international purchasing agents and domestic manufacturers. The demand in peak season has been overdrawn， and the capacity influence exists， hence， the quantity demanded in the fourth quarter will fall back. In terms of export， external demand market may transfer or the quantity demanded may decline due to intensified trade protectionism and intense Sino-U.S. trade friction.

The price of crude oil has experienced a long period of rise， and the high oil price attracts oil-producing countries to increase production， therefore， crude oil market will face with bear market. In addition， the oil prices have retreated for more than a month， the signs of stopping the decline is still not obvious in short term. If political risk increases， oil prices are likely to fluctuate sharply.

Due to the continuous influence of new capacity of industry， weaken predictable demand and low oil price， the prices of chemical fiber products may continue to fall. It is predicted that the running condition of chemical fiber industry in the fourth quarter will slightly decrease， which will run soundly all through the year.