The first quarter of 2023 chemical fiber industry operation analysis

Since 2023, China's economic recovery has maintained a good momentum, supported by the optimization of epidemic prevention and control policies and the effectiveness of economic stabilization policies. After the Spring Festival, the textile and chemical fiber industry chain resumed work and production is good, textile and apparel domestic sales are initially picking up, enterprises have certain expectations for the traditional peak season, but due to high cost operation and insufficient domestic demand, the overall production and operation situation of the chemical fiber industry is still grim. It is worth noting that, affected by the epidemic, many workers did not go home for the New Year for three years, and after the optimization of the epidemic prevention and control policy this year, due to the return of workers, some enterprises have an early holiday and resume work late, and the Spring Festival factor has a greater impact on the operation of the industry than in previous years.

First, the basic situation of industry operation

(1) Production and marketing

Data from the National Bureau of Statistics show that the production of chemical fiber in January-February 2023 was 9.61 million tons, a decrease of 5.99% year-on-year. After the Spring Festival, the textile chemical fiber industry chain resumed work and production gradually, and the overall load of the chemical fiber industry in March increased from the previous month, such as the average load of direct spinning polyester filament in March exceeded 80%.

Under the comprehensive superposition of seasonal demand, annual backlog demand, and intermediate link replenishment demand, domestic demand orders performed better, and the average operating rate of Jiangsu and Zhejiang Ammunition, Jiangsu and Zhejiang loom, and Jiangsu and Zhejiang round machine in March was 88%, 75%, and 56%, respectively, which increased compared with the same period in 2022. In March, the average daily turnover of the textile city was about 7.8 million meters, and the same period in 2022 was about 5.8 million meters. In the first quarter, the connection between chemical fiber production and marketing was basically smooth, and the inventory of main products was improved compared with 2022, and the average inventory of polyester POY, FDY and DTY was about 15 days, 20 days and 25 days, respectively

(2) Market price

In the first quarter, crude oil prices remained in the range of $70 to $80 per barrel. In March, the oil market was affected by the banking crisis, demand expectations were significantly weakened, and oil prices fell to a new low for the year, about $67 / barrel. At present, the price of crude oil has recovered to around $80 / barrel. The chemical fiber market is limited by external events, and the correlation between the price of chemical fiber products and the trend of crude oil has weakened in March, which is more of the game within the industry.

Note: WTI futures (right axis, USD/barrel), PTA, Polyester POY, polyester staple fiber (left axis, Yuan/ton)

Figure 3 Price trend of international oil price, PTA, polyester POY and polyester staple fiber since 2022

In the first quarter, the price increase of PTA in the polyester industry chain was greater than that of polyester, and the price increase was more obvious under the tight pattern of PTA supply and demand in March, and the benefit of polyester industry was compressed. The cost transmission of the nylon industry chain is slightly smooth, and with the increase of downstream demand after the Spring Festival, the price difference between the nylon fiber and the raw material is slightly expanded, but the nylon industry is still running at a slight profit. In terms of spandex industry chain, raw material PTMEG due to less capacity expansion, cost-effective supply of goods showing a tight state, the price increase is obvious, but the price of spandex products is far less than the raw material, still in the stage of correction stage, and the first quarter of spandex has new production capacity, production and sales pressure increased, inventory increased.

Unit: US Dollar, RMB Yuan

(3) Import and export information

According to China Customs statistics, the total export volume of chemical fiber main products increased by 23.60% year-on-year in January-February, of which polyester filament, polyester staple fiber, polyester bottle sheet continued high growth trend, viscose staple fiber and spandex exports fell significantly year-on-year. During the same period, chemical fiber imports decreased by 25.63% year-on-year, accounting for only 0.6% of domestic demand.

(4) Terminal market

Since 2023, policy measures to stabilize the economy have been further effective, combined with factors such as the fading impact of the epidemic, and the domestic market has changed from a decline to an increase, and the market vitality has rebounded. Data from the National Bureau of Statistics show that from January to February, the retail sales of clothing, shoes and hats, needles and textile products in units above the quota in the country were 254.89 billion yuan, an increase of 5.4%, the growth rate was 0.6 percentage points higher than the same period of last year, and the growth rate was 11.9 percentage points higher than that of 2022, and the growth rate basically returned to the level before the epidemic. The growth of online retail channels was relatively stable, and the national online retail sales of wear goods increased by 4.0% year-on-year from January to February, the growth rate was slightly higher than that of the same period last year by 0.1 percentage points, and the growth rate was 0.5 percentage points faster than that of the whole year in 2022.

In terms of exports, in the context of the global economic downturn, consumption power and consumer confidence in major developed markets have been depressed. At this stage, the industry's foreign trade exports are still affected by factors such as weak demand and insufficient orders, and will continue to be under pressure for some time to come. According to Chinese customs data, in January-February, China's textile and garment exports were 43.31 billion US dollars, down 17.8 percent year-on-year. Among them, textile exports were 20.39 billion US dollars, down 21.7% year on year; Apparel exports were $22.92 billion, down 13.9 percent year on year.

(5) Economic benefits

According to the data of the National Bureau of Statistics, the operating income of the chemical fiber industry in January-February 2023 was 142.7 billion yuan, a decrease of 4.98% compared with the same period last year; The total profit was 81 million yuan, a decrease of 97.16% year-on-year; The loss of loss-making enterprises increased by 63.66% year-on-year, but decreased by 39.01 percentage points compared with the whole year of 2022; The loss was 44.61%. From the data point of view, the economic benefits of the industry is worrying, but as the previous analysis, the impact of the Spring Festival factors on the operation of the industry is larger than in previous years, and the impact of the high base and the high oscillation operation of the main raw materials of crude oil and chemical fiber in the same period last year, therefore, it is not necessary to over-interpret the decline in industry profitability based on the data of January-February.

(6) Fixed assets investment

Affected by the Spring Festival factor, superimposed on the high base of 2022, the industry fixed asset investment showed negative growth in January and February. According to the National Bureau of Statistics, the investment in fixed assets in the chemical fiber industry fell 5.7% year-on-year in January-February. However, it is understood that there are still more new capacity plans in 2023.

Figure 5 Change of fixed asset investment growth rate in chemical fiber industry since 2008

Second, the industry operation trend forecast and suggestions

The IMF expects that global economic growth will continue to slow in 2023 due to the long-term traumatic effects of the COVID-19 pandemic, the Russia-Ukraine conflict, and the drag on economic activity caused by monetary policy tightening. According to the latest forecast on April 11, the world economy is expected to grow 2.8% in 2023, while China's economy will grow 5.2%. The strong rebound of the Chinese economy has provided impetus to the world economic recovery. Data from the National Bureau of Statistics show that in February, the manufacturing purchasing managers' index (PMI), non-manufacturing business activity index and composite PMI output index were 51.9%, 58.2% and 57.0%, respectively, and the three major indexes were located in the expansion range for three consecutive months, and China's economic development is still stabilizing and recovering. However, it should also be noted that in the process of development, enterprises still face the outstanding problems of insufficient market demand, tight funds and high operating costs, and the foundation of China's economic recovery needs to be further consolidated.

Back to the industry, the current seasonal weakening of terminal demand has been clear, and high-priced raw materials are likely to make new orders more cautious, leading to an acceleration of weaker demand. Looking forward to the whole year, although the textile and garment export pressure is more significant, but domestic sales are expected to maintain a sustained recovery trend, at the same time, chemical fiber exports will still maintain a rapid growth rate, it is expected that the chemical fiber industry operating pressure in the second half of the year will be eased.

China Chemical Fiber Association calls on the industry enterprises to strengthen confidence, actively respond, unite, tide over the difficulties, promote the stable, healthy and orderly development of the industry, and put forward the following suggestions.

1. Strengthen industry self-discipline

The imbalance between supply and demand in some areas of the chemical fiber industry has become a prominent contradiction, before the effective growth of demand, industry enterprises should focus on controlling new production capacity, avoid further escalation of the contradiction between supply and demand, in order to maintain the sustainable and stable development of the chemical fiber industry. The industry will also study and issue investment warnings to further guide enterprises to invest prudently and promote the sustainable development of the industry.

2. Seize opportunities in domestic demand

Affected by the epidemic and other factors, the contribution rate of domestic consumption to economic growth in 2020 and 2022 will fluctuate, and restoring and expanding consumption bears on the overall situation of development. The report to the 20th National Congress of the Communist Party of China pointed out that efforts should be made to expand domestic demand and enhance the basic role of consumption in economic development. According to the Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035), we will comprehensively promote consumption and accelerate the upgrading of consumption. According to the 2023 government Work report, we will focus on expanding domestic demand and give priority to restoring and expanding consumption. Previously, the Ministry of Commerce positioned 2023 as a "consumption boost year" and will also introduce a series of measures to boost consumption. Chemical fiber industry enterprises should seize the favorable opportunity to accelerate the supply side reform, implement the "three products" strategy, strengthen technological innovation and product innovation, lead the consumption trend, and creatively meet the increasing diversification and personalized market consumption.

3. Expand export market

With the adjustment of the international division of labor, China's chemical fiber exports have continued to increase rapidly in recent years, and the total chemical fiber exports are expected to exceed 9 million tons before and after 2030. While doing a good job in the domestic market, industry enterprises should actively expand the international market, such as promoting cross-border e-commerce, setting up overseas sales institutions, participating in overseas related exhibitions, etc., to accelerate the cultivation of new growth points for product sales.