On June 28, local time, Federal Reserve Chairman Powell was invited to participate in a policy panel discussion at the European Central Bank Central Bank Forum. Powell said that the Fed has not yet completed its work to combat inflation and may even implement consecutive interest rate hikes at its monetary policy meeting this year.
As soon as this news came out, international oil prices rose sharply on the 28th. As of the close of the day, the price of light crude oil futures for August delivery on the New York Mercantile Exchange rose by $1.86 to close at $69.56 per barrel, an increase of 2.75%; the price of London Brent crude oil futures for August delivery rose by $1.77, It closed at US$74.03 per barrel, an increase of 2.45%.
What impact will the Federal Reserve’s interest rate hike expectations and the surge in international crude oil have on the polyester, chemical fiber, and weaving industries?
The impact of the Fed’s expected interest rate hikes is more on the psychological level, such as dampening market confidence and consumers’ desire to buy. The fluctuation of international crude oil prices will directly affect the cost of polyester chemical fiber. As an important raw material for PTA, crude oil also plays a decisive role in its impact.
01PTA or price increase
From the price point of view of recent PTA, although the fluctuation is not very large, it can also be seen from the curve in the figure below that although its price has dropped a lot compared with April, it is currently on the rise again. Nowadays, with the rebound of international crude oil, the cost support for PTA has increased. Against the background of low processing fees for PTA, cost changes will be quickly transmitted to PTA and are expected to be reflected soon.
02 Or suppress the demand for polyester yarn
Currently, it is the traditional off-season for the downstream, and terminal orders are generally average. The downstream may mainly replenish goods for urgent needs. However, the entire polyester chemical fiber industry is still at a high operating stage, especially PTA. Under the influence of the recent restart of William, Taiwan Chemical, and Jiatong 1#, the PTA load has gradually increased from 69.58% in May to over 80%. . In the second quarter, macro factors had a greater impact on the PTA market, mainly reflected in the market’s concerns about European and American bank problems and U.S. debt problems that continue to ferment. Macro issues have a certain inhibitory effect on the commodity market sentiment. As costs rise and it is the off-season, PTA’s operating rate may decline in the later period.
Looking at major chemical fiber raw materials such as polyester filament, due to insufficient cost support during the Dragon Boat Festival holiday, polyester filament manufacturers continued to consolidate. Some companies had a strong willingness to ship, and most manufacturers carried out price reduction promotions. Subsequently, due to the rebound of international crude oil, the polyester factory immediately canceled the discount on the second day, and the price fell slightly.
The polyester load is the same as PTA. The problem of high fabric production and high inventory is that the polyester load is as high as 91.07%. At present, the overall capacity utilization rate of the polyester filament industry is significantly higher than that of the downstream texturing, weaving and printing and dyeing industries. Although price reduction promotions have played a certain role in depleting inventory, most of the time, weaving companies just need to restock, and the average production and sales of polyester yarns are only 30-40%. In the next high temperature weather from July to August, the operating rate of downstream areas such as weaving is still on a downward trend, and there is a risk of accumulation of polyester filament.
03Weaving starts or declines
The impact of international crude oil on the weaving market is more about confidence. The price of gray fabrics can be said to be unshakable, especially in the off-season, where prices will only fall but not rise. Although the weaving industry is in the off-season, the current operating rate can be maintained at around 70%. In fact, weaving enterprises have insufficient follow-up on orders for conventional and mass products, and the overall market transactions will show a narrow downward trend.
At this stage, new orders for textiles and clothing are relatively weak. Downstream weaving manufacturers are mostly stocking up on autumn and winter fabrics in advance, including warm velvet fabrics in winter. Weaving manufacturers’ gray fabric inventories are increasing compared with last week. According to data monitoring statistics from Silkdu.com, the current gray fabric inventory of weaving enterprises in Shengze area is about 35.6 days. Weaving companies are also facing high operating conditions and high inventories.
In short, the current textile industry processing is at a high level and inventory accumulation is accelerating. Under the influence of two major news, the Fed’s interest rate hike expectations and the surge in international crude oil, July may usher in a reduction in production and destocking. Overall, market confidence has been frustrated. Under the influence of the off-season and rising prices, overall procurement demand will decline.
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