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Cash flows shrink in Chinese PTA plants

PFY plants in China are witnessing shrinking cash flows. By now, only some PFT bottle chip, PET fiber chip, and polyester filament yarn plants have started maintenance.

Polymerization rate in China declined by six per cent in May 2019. Polyester plants showed stronger risk-aversion awareness when end-user demand weakened and the PTA market was firm. PTA price still enjoys support in the short run. Some downstream plants that had low feedstock inventory at hand even considered cutting the run rate or shutting down temporarily, waiting for the reduction of feedstock prices. Downstream buyers presented a cautious mindset after the sharp up-and-down of PTA futures.

Stocks of finished goods in polyester plants are expected to rise with lower buying enthusiasm of downstream players and these stocks will devalue once feedstock prices slip. Thus, making a good preparation to cut production may be the best choice for polyester plants. Some PFY plants presold a lot previously, so these plants may postpone production a reduction amid the delivery issue. Generally, the operating rate of twisting units, fabric manufacturing plants and polyester plants is expected to decrease for a period, but the decrement may be not big. What happens in the second half of July remains to be seen.