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Chinese PFY sees capacity fall

Chinese direct-spun polyester staple fiber (PSF) led the way of supply-side structural reform by cutting effective capacity against the background of the expanding polyester market. Capacity growth of polyester filament yarn (PFY), polyethylene terephthalate (PET) bottle chip and direct-spun PSF fluctuated downward during 2011 to 2015. The downward trend continued for direct-spun PSF, except for virgin PFY and PET bottle chip, both of which sped up in adding new capacities.

Operating rate of direct-spun PSF in 2016 far outpaced that in 2015, notably after mid-March. Operating rate of direct-spun PSF averaged 72.2 per cent in Jan-May 2016 against the 64.3 per cent during the same period last year. Some idle capacity was deleted since early this year, but there still exists four per cent growth if calculated according to previous capacity base.

Inventories of direct-spun PSF remained high before the lunar new year holiday while it rapidly slipped and remained within 10 days after the holiday. By contrast, virgin POY inventories were less than 10 days only in January and generally stayed at 10 to 18 days.

Margins of PET bottle chip fluctuated within the range of 100 to 300yuan per meter, which enjoyed the most of three and gave rise to the large capacity expansion this year. Direct-spun PSF mostly stayed around break-even level or slightly positive while virgin POY was stuck in losses around negative 100 to 300 yuan per meter for most of the time.