Edited by Zhao Hong

National economic backdrop has presented better-turning trend in the course of economic recovery that sees a gradual revitalization of market demand, a continued increase of production and supply, a stable picture for employment and consumption price and a steady rise of the residents‘ income.With this, the manmade fiber industry was experiencing a period of rehabilitation against operational pressure and assumed a stepping-up recovery trend, characterized by a high level of operational rate, a fair inventory, and a fast-growing export growth.In spite of the positive, there are areas of concerns in terms of impact factors, like the market demand short of expectations, significant drop in profits and prominent pressure on enterprises in keeping operation in the black.On the other side of the coin, the production of main products in the category of high-performance fiber kept a steady growth with profits gained in the first half of the year, wherein, the utilization rate of Lyocell capacity has risen to the fast increase of its production and sales.

Stable growth in production and sales with inventory at a fair level

Overall, the operation is better than the first six months of last year in the fact that the manmade fiber industry maintained a high level of operations from the March on across the board,except for the first two months of January and February that witnessed an obvious downfall in the operation of production lines as affected by the Spring Festival holidays.For instance, in the direct-spinning process lines of polyester filament, the averaged operational rate of the filament hovered around 58% in the beginning two months of the new year, and around 80% or more in the following four months from March to June, even came up to over 90%in the single month of July.In the polyurethane fiber sector, the situation was not that good, as the overall running rate of the production capacity fell by about 8 percentage points over the same period of last year, with the running rate kept around 70%in January, and over 80% from February to April, and decreased to 75% in May and June.According to the National Bureau of Statistics, the production of man-made fibers in China reached 33.82 million tons, up by 3.9% in the first half of 2023, with the production growth speed on the rising trend now as against the negative downfall in the beginning of the year.

With respect to inventory, the destocking endeavors made true in the forth quarter of last year played a positive role so that the whole man-made fiber industry is not burdened with inventory pressure, thanks to the increase of downstream machinery running rate as is in the case of texturizing,polyester yarn spinning, weaving, knitting, which resulted in a reduction of main products inventory to a low-andmiddle level.As of the end of July, polyester POY, polyester staple, polyamide fiber, polyurethane fiber had stayed in warehouse respectively for 14 days, 12 days, 27 days and 39 days on averaged inventory count.

Market keeps stable with price fluctuation weakened

The market demand for man-made fibers remained at a relatively stable level that characterized a weakening price fluctuations as compared with that over the last couple of years.The crude oil price hovered for 70-80 dollars/barrel as impacted periodically by the bank crisis in Europe and USA,the production reduction in OPEC, interests rate raised by Federal Reserve of the United States of America, and the seasonal boom for travel demand in the United States and Europe.Amid these changing factors, the man-made fiber price was going on basically in line with that of crude oil trend, keeping a smooth change of curve against the drastic up-anddown pattern in the crude oil.In March and April, the price gap between polyester fiber and its raw material was narrowed,which took a turn for the better in May and June that saw a enlarged price gap between them, indicating a profit gain trend shunted back to the right track.

To be more exact, the price of PTA in polyester production chain rose by a larger margin than did the polyester fiber price, resulting in profit shrinkage in this sector.And the situation improved, to some extent, when PTA price fell more than polyester fiber.Taking polyamide fiber for example, the downstream demand for this fiber kept going on all right with smooth conduction effects in costs pressure,leading to a meager profit in this sector.But the good situation did not stand still when its price assumed a downslide on account of its raw material price going down and new orders coming in decrease since May set in.In polyurethane fiber sector, the situation looked bleak, for PTMEG was sold at a strong price level, driven by the demand heat and cost rise, which was seen particularly in the first quarter.Moreover, the polyurethane fiber manufacturers did not sell well in line with production schemes, giving rise to inventory pressure.The new production capacities went on streams,adding more competitiveness in the market.All of these contributing factors led some manufacturers to partial shutdown of their operations, aggravated by the polyurethane fiber price that dropped more than its raw material,significantly diminishing the cash flow in the companies in the second quarter.

Export continues uptrend at different growth rate for specific product varieties

According to the Customs Statistics, the first half of 2023 sees export grew by 17.4% against the same period last year, 8.68 percentage points higher than the whole year growth rate in 2022 while the import fell by 14.5% for the main man-made fiber products taken together.Speaking of polyester filament, its export went up by 25.9% in the first six months this year, thanks to the active promotion of overseas market, and to the effect that the Chinese man-made fiber companies rushed to the export accomplishment ahead of the timeline to avoid the impact of Indian BIS certificate requirement, wrapping up a fast growth by 165% in PET filament, making it possible for India to be the biggest market for this product line, taking up 14.9% in export share.PET bottlegrade chips were exported in an up-curve trend to a level of 2.9% at a lower growth rate over the corresponding period last year, and the averaged decrease projectiles were also seen in the export of polyamide fiber, acrylic fibers, viscous fibers and polyurethane fibers.

Steady increase in domestic demand v.s.up-stepping pressure in international market

In view of the important export destinations for textile and apparel industry, those markets are hypodynamic in consumer spending power so that the retail for apparel slowed down in sale growth, which kept the stockpile pressure on the international buyers at an undue level yet to be solved, meaning that the international sourcing pattern needs a continual readjustment, giving rise to the export pressure at a steaming-up rate.The Chinese Customs data shows that China exported $142.68 billion worth of textiles and apparel from January to June at a drop rate of 8.3%,further deeper in growth downfall since the second quarter,with textiles export fall by 10.9%, respectively by 12.1% in yarn, by 11% in fabrics and 10.5% in made-ups, and the apparel export curved down by 5.9%.

Profit improves month over month despite concurrent pressure

In the first half of 2023, the profit situation for the man-made fiber industry was just a carryover from the downslide trend in 2022, noticeably with a pair of fallouts in both business income and profit.The National Bureau of Statistics released the data, showing the business income for 502.047 billion Yuan in man-made fiber manufacturing industry in the first six months, down by 2.09%, and the profit for 5.816 billion Yuan, down by 55.58%, which concludes profit/income ratio at 1.16% level.In terms of operational loss, it amounted to 8.256 billion Yuan, up by 57.91%,with 38.27% of the man-made fiber manufacturers running in red.

The industry’s profit situation was ameliorated gradually month over month that witnessed a phasein rebounding trend in the downfall of business income and profit.From the second quarter on, the overall profit-gaining ability was improved over the first quarter that had been impacted by the longholiday Spring Festival, coupled with the overlapping factors for a high data base last year and price hike of crude oil and raw materials for main man-made fiber products.Besides, the cash flow in polyurethane fiber manufacturing sector remained in good shape above the profit-and-loss mark line from January to April,but dropped offthat line of mark since May.

Downslide in investment and growth in capacity

According to the National Bureau of Statistics,the fixed-asset investment fell by 7% in man-made fiber industry from January to June.In spite of that, the actual increase of the new capacities indicated a concentrated mass investment in the first half of 2023,to the effect that new production lines for PET(5 million tons/year) went on stream, with 3.5 million tons for polyester fiber, and 1.55 million tons for non-fiber applications.

Prospect in the second half of 2023

The national macro-economy has been continuing to recover in the direction of improvement in generality since the beginning of this year and has reached 5.5% growth level in GDP during this period.The central government held a series of economic analysis meetings, pointing out the challenging factors such as shortage of demand in the domestic market, the latent risks in areas of priorities, the complicated and severe international climate, the operational difficulties in some enterprises.With this, the government will accurately implement macro-economic adjustment in strength and make greater endeavors to carry out readjustment in countercyclical fashion and enrich policy reserves, all of which are instrumental in boosting the recovery of endogenous power for national economic growth.Nevertheless, the Federal Reserve of the United States has raised interests for 11 times since the March 2022, so that many economists and institutions are of the opinion that this round of interests-raising cycle is coming to an end.Taken together, the forecast for the macro-economic trend is going toward a fair weather.Even though,one thing must be kept in mind that the economic recovery is a thorny and bumpy road, wave-like, up and down, and zigzag-like, winding and twisting.

In man-made fiber industry, the prospect for the second half of 2023 is presented on these fronts.

On raw material front: At present, international oil price is jouncing in the present price zone and will likely go stronger as backed up by the rise of seasonal demand in the third quarter, and turn weak by a little margin when it comes to the fourth quarter.In view of the capacitymatching pattern in the entire man-made fiber manufacturing chain, PTA, CPL, the main materials for man-made fibers, have more new capacities than the newly-added production lines in fiber sector, making it possible for the fiber sector to regain profits, thanks to the relatively cheaper costs of raw materials.

On supply front: Some installations that were prescheduled to go into production in 2022 have now procrastinated into this year, leading to a throng of the new capacity to be congested for making debut in 2023, the year of the greatest number of new production streams added in recent years.Therefore, the companies should take steps to control the new additions before the market demand effectively grows, and ought to be disciplined for the interest of the whole industry, a proper way of avoiding the escalation of demand/supply contradiction, safeguarding the continuous and smooth development of the manmade fiber industry in China.

On demand front: There is a solid foundation for domestic market to realize a stable recovery, and consumers’spending confidence is revitalized by policy incentives.Speaking of the consumption priorities, the home-textile market is worthy of primary attention.In aspect of export,the man-made fiber products are still expected to grow at a steady level against the rising pressure of the whole textile and apparel overseas shipments.

In the whole-year outlook, the economic performance of the man-made fiber industry is foreseen in a good prospect, but the concern remains to see that whether the supply-and-demand relationship can be effectively improved is a critical factor for the holistic industry to come back to the normal growth track, which requires a certain period of time for the cyclical reinvigoration, as assumed.According to the data available, the various indicators for the economic growth are forecast to wrap up a fair curveup level, credible much to the effective readjustment and the lower growth data base concluded in the fourth quarter last year.