Chemical Fiber: Brief Analysis Of Operation In The First Three Quarters Of 2021

Since the beginning of this year, the industry has faced complex challenges at home and abroad, especially in the second half of this year, the domestic epidemic situation and energy consumption double control continued to increase, which has a significant impact on the recovery of the main operating indicators of the industry. The stable domestic demand market and increased international demand are still good for the economic operation of the industry. The international oil price continues to rise, which provides a strong support for the chemical fiber market, but also increases the production costs of enterprises. Looking forward to the whole year, the operation of chemical fiber industry will still face many tests, but the industry has good development toughness and risk resistance ability, and will still achieve stable development.

　　 01 Production growth slows down

In the first three quarters, the overall operating load of the chemical fiber industry remained at a high level, but in September, due to the impact of double control of energy consumption, the operating load decreased rapidly. Taking direct spinning polyester filament as an example, the starting load was about 85% at the beginning of September and dropped to about 75% at the end of September; Although it recovered slightly in October, it was still in low load operation, with an average monthly operating load of about 77%, a new low in the year (Figure 1). According to the data of the National Bureau of statistics, from January to September, the output of chemical fiber was 50.37 million tons, with a year-on-year increase of 13.54%. Taking January September 2019 as the base period, the average growth rate of chemical fiber production in two years is 6.75%.

Figure 1   Load variation of direct spinning polyester filament from 2019 to 2021

(data source: Huarui information)

On a monthly basis, affected by the change of chemical fiber production base last year, the year-on-year growth rate of chemical fiber production this year has fallen month by month (Fig. 2). In addition, with the impact of double control limit of energy consumption, the chemical fiber output in September decreased by 2.0% year-on-year, and the growth rate of chemical fiber output from January to September dropped to 13.5%, 3.6 percentage points lower than that in the first half of the year. From the perspective of the average growth rate in the two years, the average growth rate in the first three quarters remained stable, but the growth rate slowed down.

Figure 2   Changes of chemical fiber output growth in 2021

(source: National Bureau of Statistics)

　　 02 Price center of gravity moves up

From the cost side, the international oil price continued to rise, WTI and Brent crude oil prices rose from 48 US dollars / barrel and 51 US dollars / barrel at the beginning of the year to 75 US dollars / barrel and 78 US dollars / barrel at the end of September, both of which increased by more than 50%. In October, both WTI and Brent crude oil prices broke through the $80 mark (Figure 3), and the international oil price has far exceeded the price level before the outbreak of the epidemic.

Figure 3   International oil price trend from 2019 to November 2021

(data source: Huarui information)

Affected by the rising crude oil price, the cost of chemical fiber is rising, which promotes the price of chemical fiber market, but the increase is less than that of raw materials. Take polyester as an example. At the end of September, compared with the beginning of the year, raw materials PTA and MEG increased by 36% and 43% (Fig. 4), while polyester filament (POY) and polyester staple fiber increased by 30% and 24% respectively (Fig. 5). It can be seen that the price increase of fiber products is lower than that of raw materials.

Figure 4   Price trend of polyester raw materials from 2019 to November 2021

(data source: Huarui information)

Figure 5   Polyester price trend from 2019 to November 2021

(data source: Huarui information)

　　 03 Export keeps growing

According to the statistics of China Customs, from January to September, the export of main chemical fiber varieties was 3.5484 million tons, with a year-on-year increase of 21.49%. The growth rate dropped by 21.03 percentage points compared with the first half of the year. On the one hand, the base increased in the same period last year, and on the other hand, the production and supply decreased in the third quarter. On the whole, the export of chemical fiber still maintained a growth trend. Although the growth rate dropped slightly, the export scale still exceeded the level before the epidemic, with an average growth rate of 3.31% in two years (Table 1).

Table 1   Statistics of export volume of main chemical fiber products

(source: China Customs)

　　 04 The end market remains good

Since this year, China's textile and clothing domestic demand market has withstood the impact of local epidemic situation and flood situation, and the warming trend has been consolidated. According to the data of the National Bureau of statistics, from January to September, the total retail sales of clothing, footwear, knitwear and textiles above the national quota increased by 20.6% over the same period of last year, with an average growth rate of 2.8% in two years. From January to September, the retail sales of online wear goods increased by 15.6% year-on-year, 12.3 percentage points higher than the same period last year, with an average growth rate of 9.3% in two years.

In terms of export, China's textile and garment exports have maintained a good growth due to the recovery of international market demand and the return of some overseas orders. According to the data of China Customs express, from January to September, China's textile and clothing exports totaled US $227.59 billion, a year-on-year increase of 5.6%, a 6.5% slowdown compared with the first half of the year, and an average increase of 6.2% in two years. From January to September, the clothing export volume reached 122.41 billion US dollars, a year-on-year increase of 25.3%, the highest growth rate since 2010, with an average growth rate of 4.2% in two years. Affected by the fall of international demand for epidemic prevention materials, the export volume of textiles was 105.18 billion US dollars from January to September, a year-on-year decrease of 10.7%, but the average growth rate in two years still reached 8.6%.

　　 05 Profitability remains stable

From the data of the National Bureau of statistics, the overall economic benefits of the chemical fiber industry increased significantly compared with the same period in 2020. From January to September, the chemical fiber industry achieved an operating income of 744.183 billion yuan, an increase of 33.28% over the same period of last year, and an average growth rate of 7.85% in two years; The total profit was 47.138 billion yuan, with a year-on-year increase of 317.99% and an average growth rate of 52.70% in two years; The profit margin of operating revenue reached 6.33%, 4.31 percentage points higher than the same period in 2019, 3.17 percentage points higher than that in the same period in 2019; The loss of the industry was 20.56%, with a year-on-year decrease of 18.36 percentage points and a decrease of 3.86 percentage points compared with the same period in 2019; The loss of loss making enterprises was 3.952 billion yuan, a year-on-year decrease of 54.17%, and an average decrease of 12.89% in two years.

The profit level of chemical fiber industry ranks first in the textile industry chain, among which polyester and spandex industries contribute 40% and 23% of the total profits respectively. The supply side structural reform is the fundamental reason for the chemical fiber industry to achieve a substantial increase in benefits. The supply and demand pattern of the industry is improved and the profits of the industrial chain are transferred from raw materials to fibers. In addition, the inventory premium of raw materials and products in the price rising channel also contributes a lot to the profits of enterprises.

　　 06 Investment in fixed assets increased significantly

According to the data of the National Bureau of statistics, from January to September, the investment in fixed assets actually completed by the chemical fiber industry increased by 29.5% year-on-year, and the growth rate increased by 51.8% compared with the same period last year. The average growth rate of investment in chemical fiber industry in two years was 0.3%, and the investment scale has basically recovered to the level before the epidemic.

　　 expectation

Looking forward to the whole year, the operation of chemical fiber industry will still face many tests. Under the background of global economic recovery and with the weather getting colder, crude oil consumption demand is expected to remain strong, and OPEC will maintain cautious increase in supply. However, the negotiation of Iran nuclear agreement and changes in monetary policies of various countries may become risk points leading to oil price fluctuation. It is expected that oil price will weaken the support for chemical fiber market in the fourth quarter. In October, local power rationing has been liberalized, downstream weaving operation rate has been significantly restored, while the chemical fiber industry load recovery is slow. Recently, Fujian, Zhejiang and other places suspended orderly power consumption measures, which means that the power rationing policy will be further liberalized in the short term. At the same time, the holiday atmosphere at the end of the year will increase the demand of the terminal market, but the release of new capacity will offset the positive effect to a certain extent. In addition, we still need to pay attention to the uncertainty of the industry caused by the winter epidemic rebound.

In summary, in the fourth quarter, with the consumption of raw materials and stable demand of downstream enterprises, the operating load of chemical fiber industry will further increase, but it is difficult to recover to the previous high level, and the chemical fiber market price will remain high and volatile. It is estimated that the annual growth rate of chemical fiber production will further decrease compared with the first three quarters due to the gradual increase of the base in the same period last year; The economic benefit index will still be significantly better than last year. However, the industry should have a clear understanding and be alert to the "reverse flow" of overseas orders after the fall of international oil price and the obvious alleviation of Xinguan epidemic situation, which will bring greater risks to China's chemical fiber and textile industry, and the increasingly strict control of energy consumption in China will also be a long-term problem for the industry.

(source: China Chemical Fiber Industry Association)