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China’s polyester textile industry faces challenging market during remainder of 2013

China’s polyester textile industry faces challenging market during remainder of 2013 Source: ei.wtin.com
Date: 13-05-2013
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According to data published by China Customs and China’s National Bureau of Statistics (NBS), production and sales throughout the polyester supply chain grew during the first quarter, helped in part by growth, albeit modest, in the national economy. However, the Purchasing Manger Index (PMI) for April, a key indicator of the health of the country’s manufacturing industry, pointed to the emergence of a less favourable business climate at the start of the second quarter.
 
Relief from inventory pressure

Polyester fabric sales from four major textile hubs (Shengze, Jianxing, Changxing and Huzhou) in eastern China increased by 9.76% and 3.03% in terms of volume and value, respectively, during the first quarter. However, as those figures suggest, profits shrank, falling by around 25.5%.
 
Fabric output in Shengze rose by only 1.09% during the first quarter, compared with the corresponding period in 2012. The growth rate in Jianxing was 6.92%. The largest increase of 30% was recorded in Changxing, though this was from a low base in 2012.
 
Since January, stocks held by filament yarn manufacturers have fallen significantly. The drop was influenced by an improvement in sales triggered mainly by seasonal factors. Demand for furnishings, curtains and bedding was especially robust during the latter stages of the first quarter. At same time, March is an active period for sales of summer clothing.
 
Surging costs and fragile recovery

NBS data also indicate that during first quarter overall production costs incurred by man-made filament yarn manufacturers jumped by 9.39%.
 
The impact on competitiveness has reverberated through the supply chain and may have contributed to a slowdown in the growth of sales. Exports of polyester fabric for instance increased by 19.66% and 26.26% in January and February, respectively, compared with a year earlier. However, the pace of growth declined in March to 10.44%.
 
Average polyester fabric prices increased by US$1.06 per metre between January and February, but declined by US$1.02 per metre in March.
 
The polyester sector still relies heavily on sales of end products to export markets.  In the first quarter, the export volume of textiles and apparel to the US and Europe soared by 38.34% and 75.03%, respectively. However, the increase in the volume of sales involved concessions on price, with average unit prices to those markets falling by 18.25% and 13.38%. Although growing, sales to the domestic market are still not sufficient to bolster the polyester primary textile industry on their own.
 
Pessimistic Perspective

Although the market for Chinese polyester manufacturers proved challenging throughout 2012, most business owners anticipate a further deterioration in the business climate during 2013. Most filament yarn producers experienced pressure from increasing inventories during February. While those stocks have subsequently been rationalised, a further 4 million tonnes of new capacity is expected to be brought on stream during 2013, which could result in the need to reduce operating rates or face sustained upward pressure on unsold stocks. Current cautious estimates of potential growth in the Chinese economy during the remainder of the year would suggest that demand is unlikely to increase sufficiently to absorb the possible growth in polyester filament yarn output, notwithstanding the ability of manufacturers to regulate production by idling capacity.
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