l t l 8 1 7 6% a monthly review - pci wood mackenzie · pdf file2 fibres report –june...

FIBRES REPORT

A MONTHLY REVIEW

June 2016

No 334

29.06.2016

PCI Research GmbH

Holzweg 14

61440 Oberursel

Germany

Phone: +49 6171 989090

Email: [email protected]

www.pcifibres.com

PCI gives no guarantees and/or warranties, expressed or implied, on the fitness of the reported information for any purpose.

PCI disclaims any and all liability and responsibility for the results obtained from the use of information in this report.

Polyester raw material and fibre demand in Asia weaker; prices eased.

The G20 summit will impact fibres production; supply should suffice, but

prices in EU talked up. China PTF exports are good, high levels to South

America. North America raw materials rise but fibre prices are flat.

Nylon textile prices fall in China on weaker demand. Taiwan exports

down. Industrial filament in North America running well. Europe textile

filament prices stable. Nylon filament used in Christo project for a

walkway over Lake Iseo, Italy.

Viscose prices have peaked. Acrylic fibres prices up globally, and

Chinese assets well utilised, with imports falling after anti-dumping

actions. Polypropylene prices are fairly flat.

HEADLINES

PRICE MOVEMENTS

UPCOMING EVENTS

The 24th PCI Wood Mackenzie European Polyester Industry Conference 1 October 2016 / Budapest. Broaden your understanding of the global polyester industry chain from feedstock developments through raw materials to polyester fibres and PET resin.

The PCI Wood Mackenzie World Fibres Conference 9-10 November 2016 / Hong Kong. Updating you on the latest developments impacting the global fibres industry as China comes to terms with overcapacity and increasing competition.

Further details for both Conferences coming soon.

To register your interest please contact Janine Hughes at [email protected].

Product Reference Unit

Price

this

month

Price

last

month

Month-on-

month Price

Change

Month-on-

month Price

Change (%)

Crude Oil OPEC Ref.basket $/bbl 45.98 43.21 2.77 6%

Propylene Asia, CFR, Spot, mp $/mt 728 748 -20 -3%

Caprolactam Asia, CFR, Contract, mp $/mt NF 1278 - -

PTA China, CFR, Spot, mp $/mt 644 663 -19 -3%

MEG China, CFR, Spot, mp $/mt 613 628 -15 -2%

PES Chip Asia, CFR, Spot, mp $/mt 809 850 -41 -5%

Polyester Fibre Asia,150 den POY, mp c/kg 96 98 -2 -2%

Polyester Fibre Asia, 1.4 den, mp c/kg 91 93 -3 -3%

Nylon Fibre 70 den weaving, mp c/kg 215 218 -3 -1%

Cotton Cotlook A-Index (FE) c/lb 74 70 4 6%

Viscose Fibre China, 1.5 den, mp c/kg 179 177 2 1%

Spandex China, 40 den, mp RMB/mt 31000 31500 -500 -2%

mp = mid-point

mailto:[email protected]

http://www.pcifibres.com/

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2

Fibres Report – June 2016

RAW MATERIAL PRICES

Terms Unit Jun-15 Q1 2016 May-16 Jun-16

Viscose staple: DWP US$/mt 825 839-850 863 876

Acrylics + others: Propylene

Asia CFR Spot US$/mt 980-1010 590-725 745-750 720-735

USA FOB US$/mt 882 661-694 717 728

Europe DEL US$/mt 1155 622-674 718 737

Europe DEL €/mt 1030 560-620 635 653

Acrylics: Acrylonitrile

China domestic FOB RMB/mt 9000-9500 7850-8000 8300-8500 9100-9400

China domestic equivalent CFR US$/mt 1240-1310 1020-1050 1090-1110 1180-1220

USA FOB cost-based index US$/mt 1379-1469 1066-1213 1132-1222 1127-1232

Nylon: Caprolactam

Asia CFR US$/mt 1770-1810 1130-1310 1250-1305 NF

USA DEL US$/mt 1589 1371-1511 1472 1490

Europe DEL US$/mt 1891-2036 1562-1714 1683-1818 1669-1805

Europe DEL €/mt 1686-1816 1404-1564 1489-1609 1479-1599*

Polyester: PTA

China CFR spot US$/mt 767-770 599-663 646-680 632-657

USA DEL US$/mt 1107 858-876 917 936

Europe DEL US$/mt 844-888 677-736 742-787 742-789

Europe DEL €/mt 753-792 610-677 657-696 657-699

Polyester: MEG

China CFR spot US$/mt 910-970 550-730 600-655 598-628

Asia CFR announced US$/mt 1100-1140 700-760 800-850 770-790

USA FOB based on announced Asia US$/mt 1154-1194 754-814 854-904 824-844

Europe DEL US$/mt 1241 777-809 870 897

Europe DEL €/mt 1107 700-745 770 795*

Polyester: Fibre Chip

Asia CFR spot US$/mt 977-997 723-835 835-865 808-811

USA DEL US$/mt 1655-1675 1300-1345 1345-1390 1345-1390

Europe DEL US$/mt 1222-1301 945-1029 1045-1113 1055-1123

Europe DEL €/mt 1090-1160 860-925 925-985 935-995*

Polypropylene: Fibre grade

Asia CFR spot US$/mt 1250-1300 840-1050 1060-1160 1060-1160

USA DEL US$/mt 1290-1320 1190-1300 1190-1290 1100-1200

Europe DEL US$/mt 1570-1626 1071-1184 1243-1356 1253-1377

Europe DEL €/mt 1400-1450 965-1090 1100-1200 1110-1220

$ per € 1.12 1.10 1.130 1.129

RMB per $ 6.21 6.54 6.53 6.57

Notes

1

2

The China domestic price for acrylonitrile (AN) is shown in RMB/mt which, after excluding the VAT, is converted to $/mt to give an equivalent CFR price.

This price does not represent the broad AN market in Asia which is subject to wider influences such as the plastics business, but it does offer a guide

to the fibres business in China which is largely and increasingly based on local AN.

The USA acrylonitrile price is not a market price but a cost-based index, reflecting only movements in feedstock costs.

KEY: * - provisional; † - revised; NF - Not Fixed

3


ACRYLIC / COTTON / VISCOSE / POLYESTER FIBRE PRICES


Acrylic fibre prices

China

Domestic/import CFR c/kg 205-215 152-178 158-177 157-176

Americas

3 denier tow CFR c/kg 230-245 170-188 175-180 185-195

Europe

3 denier tow DEL €/kg 2.10-2.20 1.70-1.80 1.77-1.82 1.85-1.90

c/kg 235-247 189-198 200-206 209-214

Cotton price

FE A-Index (avg.) CFR c/lb 72 66 70 74

China Cotton Index DEL c/lb 99 83 87 87

India Shankar-6 Spot c/lb 68 62 67 74

Viscose prices

China (based on RMB)

1.5 den CFR c/kg 171-178 160-181 176-177 178-179

120 den CFR c/kg 502-544 462-507 470-519 462-501

Polyester fibre prices

Asia (CFR)

1.4 / 1.5 den CFR c/kg 108-120 86-100 92-94 89-92

6 den solid (fibrefill) CFR c/kg 103-110 81-92 84-89 82-87

4 den binder CFR c/kg 145-155 108-115 118-122 120-125

75 den POY CFR c/kg 121-136 92-111 100-110 99-109

75 den textured CFR c/kg 148-163 118-136 122-135 121-134

150 den POY CFR c/kg 112-125 89-105 93-102 90-101

150 den textured CFR c/kg 126-141 105-122 113-120 112-118

1000 den conventional shrink CFR c/kg 145-165 119-133 123-128 118-123

USA (DEL)

0.9 den DEL c/lb 95-97 81-85 84-86 84-86

1.2 / 1.5 den DEL c/lb 94-96 80-84 83-85 83-85

1.2 / 1.5 den (feedstock linked) DEL c/lb 81 68-72 71-73 71-72

6 den solid (fibrefill) DEL c/lb 82-84 68-72 71-73 71-73

4 den binder DEL c/lb 76-80 59-65 62-66 62-67

70 den POY DEL c/lb 113-120 102-109 105-110 105-110

70 den textured DEL c/lb 128-151 117-142 117-139 117-139

150 den POY DEL c/lb 101-107 90-98 93-98 93-98

150 den textured (weaving) DEL c/lb 110-130 103-120 103-117 103-117

1000 den low shrink DEL c/lb 115-123 111-123 112-123 112-123

Europe (DEL)

1.7 dtex DEL €/kg 1.34-1.86 1.10-1.70 1.12-1.69 1.12-1.69

c/kg 150-209 122-188 127-191 126-191

6.7 dtex solid & hollow DEL €/kg 1.23-1.47 0.99-1.30 1.00-1.27 1.00-1.27

not recycled, various finishes c/kg 138-165 110-144 113-144 113-143

4.4 dtex binder 50/50 DEL €/kg 1.67-1.87 1.20-1.58 1.25-1.55 1.28-1.57

standard finish, nonwovens c/kg 187-210 133-172 141-175 144-177

167 dtex POY DEL €/kg 1.40-1.65 1.24-1.48 1.28-1.45 1.28-1.45

c/kg 157-185 137-162 145-164 144-164

167 dtex textured DEL €/kg 1.62-1.85 1.44-1.73 1.48-1.70 1.48-1.70

c/kg 182-207 159-190 167-192 167-192

1100 dtex conventional shrink DEL €/kg 1.60-1.90 1.40-1.77 1.50-1.76 1.52-1.76

c/kg 179-213 154-196 170-199 172-199


$ per € 1.12 1.11 1.13 1.13

RMB per $ 6.21 6.50 6.53 6.57

4


NYLON / SPANDEX FIBRE PRICES


Nylon prices

Asia (CFR)

70 den, flat (cheese) CFR c/kg 285-290 210-220 215-220 212-217

CFR c/lb 129-132 95-100 98-100 96-98

70/24 flat (China trade) CFR c/kg 255-262 189-195 194-199 191-195

Local delivered DEL RMB/mt 18750 14600 15000 14850

840 den, industrial CFR c/kg 250-350 215-315 215-312 214-312

range PA6 to PA66 CFR c/lb 113-159 98-143 98-142 97-142

USA (Delivered)

40 den, textured (hosiery)* DEL c/lb 365-380 365-370 365-370 365-370

70-200 den, flat (weaving)*** DEL c/lb 245-315 235-300 235-300 235-285

70f68 textured** DEL c/lb 330-380 330-370 330-370 330-370

1200 den, BCF*** DEL c/lb 148-230 144-230 144-225 144-225

840 den, industrial** DEL c/lb 175-195 165-185 165-178 165-178

*PA6 **PA66 ***PA6/66

Europe (Delivered)

17 dtex, POY* DEL €/kg 5.15-5.20 5.00-5.05 5.00-5.05 5.00-5.05

c/lb 262-264 246-255 256-259 256-259

17 dtex, textured* DEL €/kg 6.55-7.10 6.35-6.95 6.35-6.95 6.35-6.95

c/lb 333-361 313-351 325-356 325-356

44 dtex, warpknit (beam) DEL €/kg 4.05-4.20 3.70-3.95 3.75-3.90 3.75-3.90

c/lb 206-214 185-197 192-200 192-200

78 dtex, POY* DEL €/kg 3.30-3.37 3.05-3.20 3.05-3.15 3.05-3.15

c/lb 168-171 153-159 156-161 156-161

78 dtex, weaving (on cheese) DEL €/kg 3.85-3.95 3.65-3.80 3.65-3.75 3.65-3.75

c/lb 196-201 182-189 187-192 187-192

78f68 textured* DEL €/kg 4.35-4.85 4.10-4.65 4.10-4.55 4.10-4.55

c/lb 221-247 206-230 210-233 210-233

940 dtex, industrial * DEL €/kg 2.85-3.34 2.65-3.20 2.65-3.10 2.65-3.10

c/lb 145-170 131-161 136-159 136-159

1350 dtex BCF DEL €/kg 2.70-3.02 2.40-2.80 2.40-2.72 2.40-2.72

c/lb 137-154 121-141 123-139 123-139

*PA66

Spandex prices

China

40 den, warp knit DEL RMB/mt 38000-42000 32000-38000 29000-34000 28000-34000

40 den, other end-uses DEL RMB/mt 35000-36000 29000-35000 27000-29000 27000-29000

USA

40 den, warp knit DEL c/lb 420-505 400-480 400-480 400-480

Europe

40 den, warp knit DEL €/kg 6.45-8.80 5.70-8.25 5.70-8.10 5.68-8.10

40 den, other end-uses DEL €/kg 6.30-8.30 5.65-7.80 5.65-7.65 5.63-7.65


$ per € 1.12 1.11 1.13 1.13

RMB per $ 6.21 6.50 6.53 6.57

LEADER

5


LEADER: MADE IN TOWN

How do we decide where to make our products? The answer is usually a mix of proximity

to six elements; cheap energy, cheap raw materials, cheap labour, cheap capital, the end

market, and appropriate technical skills to meet the manufacturing needs. Early

industrialised countries like USA, Europe and Japan saw textile production largely move to

Korea and Taiwan, and more recently to China. Now China would prefer to transition to a

more value-adding economy rather than operate simply as a low-cost producer. This

means that it is not clear what happens “after China”. Some Chinese producers are

starting to establish apparel and textiles factories in other countries, like Vietnam, but still

China remains the globally dominant producer. What alternatives are being developed for

the future?

One growing trend is not to make everything in China. Indorama recently explained the

benefits of their multi-site approach, with manufacturing locations in several countries

around the world. We have got used to reading not only “Made in China”, but also “Made in

Bangladesh” and increasingly “Made in Vietnam” on our labels. The quality of products

being made in these production hubs is improving and this seems like the new norm. So

we are already getting used to reading “Made Somewhere Other than China” on our labels,

but not usually made locally, except for really specialty and high-cost products.

Can new technology be developed to allow the production of textile and apparel products

closer to home, “back to region”, rather than rely on imports from low-cost countries?

Some consumables and articles are already made close to their end user, and this is done

in order to sustain a wide product variety with short call-off but without a huge volume of

slow-moving stock. Examples include sewing threads (using many yarn types and colours)

and car seats (with different seat covers, colours and functionality).

Now Adidas has indicated a radically new approach with potentially far-reaching

consequences for our industry; some new product lines in sports shoes (with textile uppers)

will be made in Europe, rather than China. The first so-called “Speedfactory” will be at

Ansbach, Germany, and should go into full-scale production in 2017. The plant will use

robotic processes instead of human labour and Adidas has indicated that the factory will be

internationally cost-competitive. Adidas is creating shoe uppers on the new flexible

technology in one piece, reducing waste and labour and allowing personalization and quick

changes. Whilst this is simply a shoe rather than a garment, the robotic processes for

managing complex 3D garment structures may still be just around the corner. Adidas

suggest they may be making Germany’s national soccer shirt within the country soon.

This approach will allow companies to compete better with their Chinese counterparts by

reducing costs and thereby lessening the impact of the labour cost element on the sourcing

decision. There are many benefits of this approach and one is protection of intellectual

property, when you don't have to show a 3rd party how to make your products, and fear

having to compete with a precise copy a few months later. The design can be flexible,

when you have the ability to modify colours, change style and even offer unique products

for an individual customer. Crucially, chain of custody would be easier to manage if more

steps are in one pair of hands (see our Bio/Sustainable section of this report).

Production of commodity textiles will probably remain in low-cost locations and still be used

as a development industry, whereas the combination of shorter pipelines, flexible batch

production and chain of custody are all powerful arguments for a move ‘back to region’, if

the cost challenge can be managed. Rather than making millions of articles in a Chinese

hub and shipping them all around the world, the pioneering Adidas example suggests a

world in which they can be made close to home, in the desired colour, in the required

POLYESTER CHAIN

6


quantity and exactly when they are needed. If this technology example is successful

across a widening range of product types, it could fundamentally change the geographic

structure of significant sections of the fibre and textile manufacturing industry.

POLYESTER: RAW MATERIALS

ASIA POLYESTER RAW MATERIALS

In Asia, May saw no contract settlement for paraxylene (PX) and the same happened in

June. The failure to settle the June Asian contract price (ACP) was not unexpected but it

still rattled some nerves and spot values initially dropped then traders took the opportunity

to bargain hunt. As contract supplies have largely been limited to end-users (rather than

traders) product is being used in the chain, and the resulting stricter selling discipline has

meant PTA prices have risen in the month. Spot deals ranged from $795/mt early on and

$835/mt mid-month, as crude rallied, then fell back to $815/mt as we write. The expectation

of buyers that numbers had to fall to below $770/mt in June have not materialised, and the

higher spot prices have vindicated the suppliers’ approach of holding out for higher

numbers in contract discussion. Current crude values see numbers falling back in June

with Brent averaging $50/barrel in the last week. Asian naphtha has steadied in the last

few weeks, and PX spreads over naphtha whilst still healthy have fallen closer to $380/mt.

As for PTA there are few issues and volumes have been low, with local PTA sales in RMB

prices easing during the month in the range RMB4440-4635/mt and currently trading at

RMB4600/mt. Spot prices fell towards $610/mt mid-month picked-up later to $630/mt and

as we write spot PTA is trading at $635/mt,

Prices for Polyester Raw Materials in Asia

The lacklustre performance of all PES markets in Asia and China in May led to lower price

nominations for the June Asian contract price (ACP) on monoethylene glycol (MEG), with

the major suppliers nominating at $770 to $790/mt. The July ACP nominations are

between $760-770/mt FCA. Despite volatile markets in crude oil and stock markets, spot

MEG prices have remained relatively stable in a band between $600-620/mt CFR well

below the cost of production for non-integrated producers. Market prices remain well below

expected levels. In Q3 further pressures are likely due to the G20 summit in September

and the government forcing factories to shut down up to a month beforehand. The June

Chinese polyester fibre chip is down at the top end of the range by -RMB375 at RMB5900-

5925/mt. The rPET flake price is at RMB4400-4500/mt, up +RMB50/mt on last month.

1,400

1,500

1,300

0

700

800

1,200

1,000

1,100

900

US$/mt

Apr-

16

Apr-

14

Apr-

13

Oct-

14

Jul-

13

Jan-

15

Jul-

15

Jan-

13

Oct-

15

Jul-

14

Jan-

14

Jan-

16

Apr-

15

Oct-

13

PET Chip (Asia)

PTA (Asia)

MEG (Asia)

No Asian PX

settlement

again, looks to

be rising

PTA spot prices

fairly flat in

China

POLYESTER CHAIN

7


AMERICAS POLYESTER RAW MATERIALS

In North America, the paraxylene (PX) May contract finally settled at 40.5c/lb for PX and

41.60c/lb for PTA. June saw a relatively early settlement with the US PX contract price

settling at 41.75c/lb., up +1.25c/lb. over May. This translates into a US PTA contract price

of 42.44c/lb., up +0.84c/lb. This is the fourth consecutive increase in the US PTA contract

prices. The US toluene based routes for PX production are coming under more margin

pressure with toluene lifted by weakening gasoline and benzene values. There are no PTA

supply issues reported as more material is seen moving from Mexico/Canada to the US.

Small amounts of Korean PTA try to get into the US which is an irritant now for US

producers but is not really impacting the market overall. Though with the announcement of

large PET import duties earlier in the month there may be added pressure on PTA supply

which is already running at high rates, in order to support local PES production.

Early in June US monoethylene glycol (MEG) inventories remained on the low side as a

carry over to the planned and unplanned outages from prior months. MEG stocks are

improving and the Equistar long turnaround starting in mid-July will keep inventory under

control. Global inventories are starting to build in June with most of the increase in China.

China spot prices could stay low thus any US surplus could see a very low arbitrage value

with the latest China spot number now at $600/mt CFR. That is a netback to the US of

$520/mt FOB or 23.6c/lb. Current US spot is near 27.5c/lb as falling inventory builds with

increased production.

The polyester chip price in June is largely unchanged and settled +3c/lb up at the top of

the range versus May at 61-70c/lb. Pressure from imports continues with China prices

reported resulting in delivered price to an East Coast customer in the 53-55c/lb range.

EUROPE POLYESTER RAW MATERIALS

Europe in June has seen a split paraxylene (PX) contract settlement. There was an early

initial settlement at €755/mt followed by a deal between leading buyer and seller at

€750/mt. These numbers were initially thought to be high but a strengthening of the USD

and increasing gasoline prices both played a role. There are no known issues with PX

supply within Europe, and substantial monthly exports out of region are continuing. As for

PTA overall European suppliers saw a market which became a little sluggish in May as

PET production slowed and some buyers were expecting prices to come off a little. June

has been a little lacklustre but acceptable, with the market coping easily with imports there

are continued suggestions that the re-start of Artlant may not be required in the current

environment which will materially support Korean exports. Spot PTA prices for May were at

€657-696/mt and should be up by typically +€2 in June, based on the split settlement.

The European demand for monoethylene glycol (MEG) into PET was very strong in April

but not so in May and June. There is still little interest to buy MEG from the coolant and

antifreeze segment due to the belief that prices will be lower later and the fact that there are

still stocks out there. MEG is not tight in Europe at least in terms of trucks and the odd rail

car. For bulk cargoes and barges product is less available until end June when more

shipments are due. Spot prices of MEG during the month moved up around €700/mt FCA

before falling back to levels around €665-690/mt FCA. These prices are more or less still in

place over two weeks now. The €770/mt was agreed for May with a proposal for June at

€795 which remains at this time unendorsed.

The June European polyester chip prices at around €935-995/mt (+€10/mt) are

provisional due to a split PX settlement and no final agreement on the chip price.

PX and PTA rise

in North

America

PX Europe has a

split settlement,

but relatively

stable

MEG not settled,

nomination is up

slightly on May

POLYESTER CHAIN

8


POLYESTER: FILAMENT

ASIA POLYESTER TEXTILE FILAMENT

Growth rates in the Chinese textile industry are lower than recent years making it look like a

mature industry at last. Recent retail apparel sales have been buoyant at this transition

from spring into summer. The Chinese government is preparing to support the economy

with RMB28 billion, which is as much as in 2015, and with special focus on smaller,

innovative companies.

In our May report (#333), we mentioned the potential for temporary plant closures during

the upcoming G-20 summit to be held in Hangzhou, Zhejiang province. This eleventh G-20

summit takes place on 4th-5th September 2016 and is the first to be hosted in China. We

can now report that around the neighbouring city of Ningbo, and in Zhejiang province,

several hundred companies are requested to close or reduce production for 2 weeks during

the summit, and a wide range of industries is affected. The list includes cement, electrical

power generation, shipyards, and importantly for us, chemicals, transport of chemicals and

chemical fibres production sites. The number of fibres sites which have been requested to

close 100% of their production during the G-20 summit include 48 in Hangzhou, 14 in

neighbouring Ningbo and 4 in Shanghai. Also 68 dyeing and printing facilities are affected.

So far there is no information about Shaoxing area, where there are many well-known

companies, including Tongkun and Xinfengming (both polyester textile), Guxiandao

(polyester industrial), Melsbon and Jinshida (both nylon textile). Zhejiang is the largest

production location for polyester and second largest for nylon and the stoppage could be

effectively 3 weeks, after one takes quality at start-up into consideration. Nevertheless, we

believe that based on China’s overall excess capacity and the long notice period to place

orders and build the right stock, it should be possible to bridge the gap.

The polyester textile filament (PFT) utilisation rate is running high at 83%, down -2% on last

month, but much higher than the same period of the previous two years (78-79%). Lower

crude oil prices and lower stock levels give fibre producers courage to run hard. This is

despite a weaker downstream market, as May and June are seasonally quiet for the

weaving and knitting industries. There are some signs of market improvement with orders

coming in, enabling warp knitters to reach 53% utilisation rate (+8-10% on last month).

Polyester yarn prices are volatile with a RMB50-150/mt amplitude depending on oil and raw

material prices. Overall, prices show a downward trend and profit margins have been

squeezed. In spite of these factors, the Chinese PTF industry is in much better shape in

year 2016 compared with the past 3 years.

Selected Polyester Textile Filament Prices in China (RMB/mt)

Chinese POY prices are fluctuating alongside raw materials, initially typically down more

than -RMB200/mt on last month, but with some recovery in recent days resulting in prices

Type Denier

75f36 7350 - 7550 7250 - 7450 -100 -100

150f96 7250 - 7350 7150 - 7250 -100 -100

200f96 7100 - 7350 7150 - 7350 50

75f36 7100 - 7250 7000 - 7250 -100

100f36 6850 - 7100 6750 - 6900 -100 -200

150f96+48 6650 - 6850 6450 - 6600 -200 -250

75f36 9600 - 9800 9500 - 9700 -100 -100

100f36 9400 - 9550 9200 - 9400 -200 -150

150f48 8150 - 8400 8000 - 8350 -150 -50

75f36 9700 - 10100 9600 - 10000 -100 -100

100f36 9550 - 10000 9500 - 10000 -50

150f48 8700 - 9100 8500 - 8900 -200 -200

DTY (non

IMG)

DTY

(IMG)

May June Change

FDY

POY (for

DTY)

China PTF prices

fall back

G20 conference

in Hangzhou will

result in reduced

output for 2

weeks

POLYESTER CHAIN

9


lower overall by -RMB150-200/mt between May and June. The POY stock level remains at

13 days, same as last month. FDY prices for standard products dropped by -RMB100/mt,

while prices for heavier denier FDY have increased slightly. FDY inventory levels dropped

4 days to the current 16 days. Demand and prices for DTY are relatively stable and the

inventory level is around 23 days. In the Shengze & Jiaxing textile markets stocks are

good and offers stable. Data from the China Light Industrial & Textile Mall in Keqiao

show average daily fabric transactions over 1st-24th June fell by -17% on May.

Polyester Textile Filament Prices in China & Asia

Higher export volume help explain why utilisation rates in China are holding up. We did

cover this export surge in last month’s report (Fibres Report #333; see the graph plus text

on pg11). In Brazil, where imports from other countries have been falling over the past 2

years, imports from China are rising strongly. Maybe not as strongly as the China export

data suggests but there could be a delay between exports and imports. We will feature the

full detail properly in our July Fibres Report.

The export volume from China increased in both Q1 and Q2 2016, despite higher ocean

freight costs which doubled in Q2 to current levels of around $160/mt. In Q1 the export

growth rate for POY reached +72%, FDY growth rate was +15% and DTY growth rate

+22% y-o-y. The export growth rate to Brazil is the highest with POY and DTY in Q1 at

+192% and +53% respectively. In addition to Brazil, there were also strong exports from

China to five other Latin American countries; Argentina, Venezuela, Chile, Columbia and

Peru (the six together making 90% of the GDP of the whole continent). India is a strong

competitor to China in these markets and exported around 40ktes PTF to Latin America in

2015, including 30ktes of DTY, almost equivalent to the volume from China. Recent growth

in Latin America is clearly an exciting and important goal for countries with overcapacity.

Korean FDY yarns have continued to defend May price levels as other Asian quotations

show slight fluctuations. Semi-dull 75f36 FDY yarns are at $1.43-1.45/kg FOB and trilobal

bright 150 denier FDY at $1.48-1.50/kg FOB. The forward market direction is unclear with

stronger oil pricing meeting still-sluggish demand.

Asian polyester margins enjoyed a period over 2008 – 2012 when margin opportunity

existed (difference between red price line and cost columns, graph below). From 2013 this

margin gap began to close as overcapacity emerged at all stages in the polyester supply

chain (raw material and fibre). Over recent quarters we have essentially seen a business

absolutely driven by raw material costs and this lockstep has continued even with the

Denier Type Terms May June Change

Domestic RMB 7100 7000 -100

c/kg CFR equivalent 93 91 -2

c/kg FOB China 95 94 -1

c/kg CFR Asian port 100 99 -1













DTY

POY

75

DTY

150

POY

Chinese export

prices relatively

flat

China exports on

the rise

POLYESTER CHAIN

10


increase in raw material prices over Q2 2016. The opportunity to build effective

reinvestment margin remains structurally limited and we see this situation continuing over

2016 / 2017.

Asia Polyester POY Margins

ASIA POLYESTER INDUSTRIAL FILAMENT

The Chinese PIF market was relatively soft with domestic and export prices adjusted

downwards by about RMB100/mt every week since late May. It has proven difficult to

maintain firm prices with the industry running at high utilisation rates. In March, PIF prices

jumped about RMB1000/mt and many manufacturers increased utilisation which peaked at

85% in April. Utilisation fell back to 78% in May but the demand could still not consume all

the output. PIF manufacturers have few alternatives than to reduce the utilisation again as

they did in December 2015, to avoid further price erosion. With lower utilisation rates and

weak margins, as energy prices rise the PIF prices could soon recover, for example from

the middle of July.

The current prices for 1000f192 conventional high tenacity yarn are RMB8700-8800/mt,

down -RMB500-600/mt on last month. For 1000 denier low shrink the price range is

RMB9700-9800/mt, down -RMB300-400/mt. The gross margin for conventional PIF has

been squeezed to less than RMB1000/mt for continuous spun, while it is only over

RMB100/mt for polymer chip-fed yarn. The stock level from the major manufacturers has

increased about 10%. Quotations from the leading companies for 1000f240 HMLS is

around RMB12700-13200/mt, down -RMB300/mt.

China export prices for conventional 1000f192 PIF fell in line with domestic sales by -

$50/mt to $1150-1200/mt, as did low shrink yarn for export which is offered at $1200-

1250/mt.

Sinopec quote this week for bright industrial grade polymer RMB6250/mt, down –

RMB250/mt on the May settled price. The current spot price from major suppliers in east

China is around RMB5900-5950/mt, down -RMB200-250/mt on last month.

Guxiandao, one of the leading industrial fibre producers, located in Shaoxing, which is in

the environment control area for the G20 summit, is likely to close for two weeks from 24th

August 2016. The companies in the Shaoxing area that will be requested to curtail

production have not yet been published.

0

50

100

150

200

0

10

20

30

40

50

60

70

80

90

100

110

120

US$/bl

Q1

2012

Q1

2015

Q1

2009

Q1

2011

Q1

2013

Q1

2010

Q1

2008

Q1

2014

Q1

2016

c/kg

Source: Market, Polyester 150 denier resultant

OPEC (RHS)

PTA cost

conversion cost

MEG cost

POY price

Chinese PIF

prices fall as

demand exceeds

supply and

utilisation rates

decreased to

compensate

POLYESTER CHAIN

11


AMERICAS POLYESTER TEXTILE FILAMENT

The slow market in North America reported in last month’s Fibres Report continues with

domestic shipments down 8.8% over the first 5 months of 2015 and imports down by 9%

over the first 4 months. Based on the import data, the DTY market has been the softest with

a reported decline of 14% in the first 4 months, with the reductions being spread over a

number of supply countries. Part of the volume decline seems to have been the result of

lower average denier, we hear this anecdotally in the import business and the reported data

for domestic production indicates a disproportionately large drop in the 150 denier product

while 70 denier has increased. But it is clear from the overall data that machine utilisation is

down over where it has been.

Pricing in the domestic market remains unchanged despite heavy pressure from imports

which are reported at 73-75c/lb delivered for 150f48 DTY. Import prices are generally

consistent with June, though we have heard reports of reductions of -2 to -3c/kg for FDY.

Automotive business is still good although May auto production was down by 1.5%

compared to 2015. The industry continues to be driven by pick-up truck and SUV

production, with a 4.1% increase over 2015, however passenger car production fell by

9.1%. Full year-to-date production of light vehicles is up 2.6% over last year. Most of the

auto plants will be down for 1–2 weeks during the summer depending on whether there is a

significant 2017 model year change which necessitates longer plant down time. US auto

sales were up slightly over April and, surprisingly, import penetration increased to 22.0% in

May from 20.5% a year ago.

Most customers for textile filament appear to be taking 1–2 weeks shutdown over 4th July,

with some of the fibre producers taking this as an opportunity for maintenance.

Demand for synthetic fibres in Latin America increased as the industry prepares for the

production of stocks for the back end of the year. This increase appears to be at the

expense of riskier apparel imports than actual increased market demand. Political issues

continue to prevail with Brazil’s new president, Temer, trying to secure calm ahead of the

Olympic Games. Demand in Brazil is not strong but exports are doing better, with textile

exports growing +27% Jan-April y-o-y. Exports also from Colombia and Peru are

benefitting from a weaker currency, whereas Argentina sees lower exports as the market

has only recently been opened up and trade barriers reduced.

PTF demand in Latin America has improved during the last month, with regional producers

of fabrics and apparel increasing consumption of local and imported filament. Prices of

polyester fell slightly during June. In PTF 75 denier DTY for circular knitting dropped -2 to

-3c/kg to $1.26-1.30/kg from India, and from China prices fell up to -2c/kg to $1.44-1.48/kg.

Indian offers for 150 denier DTY fell -1 to -2c/g to $1.17-1.20/kg but China remained at

$1.22-1.38/kg.

AMERICAS POLYESTER INDUSTRIAL FILAMENT

Volumes in North America are holding up quite well with tyre and auto providing the

market with good strength. In other markets, roofing substrate continues to be strong,

geotextile is good, but general broad wovens are not strong and military remains weak.

Domestic pricing is unchanged, though the quarterly raw material adjustment will take effect

in July when it appears there will be a small downward adjustment for customers who are

on contracts based on the quarterly raw material formula. Import pricing varies with some

reporting a rollover from May and others reporting as much as -5c/kg reduction seeing

1000d regular shrink down to $1.20-1.23/kg FOB China.

North American

PTF demand is

weak

Automotive

holds up

PTF demand in

Latin America

rises, maybe at

the expense of

apparel imports

PIF prices flat,

and tracking

raw materials

into Q3

POLYESTER CHAIN

12


Import penetration is at a high level but appears to have flattened out with the first 4 months

of 2016 at around the same level as full year 2015 i.e. 66% of total market.

USA Consumption of Polyester Industrial Filament (PIF)

In Latin America Brazil’s ANFAVEA (National Association of Automotive Vehicles

Manufacturers of Brazil) reduced its forecast of total vehicles to be manufactured during

2016 by -5.5% to 2.30 million vehicles. However it looks like the worst has passed and fall

in output is bottoming out; from May to April the number of vehicles produced grew 3.2%,

exports grew +24%, and it is expected that exports in 2016 will grow over +20% y-o-y.

High tenacity yarns prices experienced the biggest fall of any other category of polyester

products during the last month, a reduction of up to -5c/kg. However regional demand has

been inelastic to lower prices because technical applications still continue affected by a

poor dynamic of such sectors. Latin American imports of 1000 denier PIF have fallen up to

-5c/kg to $1.20-1.25/kg for regular shrink and a lower drop for low shrink to $1.28-1.36/kg.

EUROPE POLYESTER TEXTILE FILAMENT

June has again seen subdued polyester textile filament (PTF) demand in Europe, with

markets already facing reducing momentum as we approach the holiday period. The

BREXIT vote and the potential departure of UK from the EU will inject some short-term

uncertainty into world markets which were already looking shaky. Manufacturers are

concerned that consumers reduce their discretionary spending, and long-term that some

trade barriers may come into force. It is unclear yet whether the UK decision prompts

further market contagion, but in effect little will change over the next 2 years.

Polyester textile filament pricing in Europe is holding onto an uneasy stability, with slight

upward raw material pricing pressure meeting weak demand. Import prices are largely

stable, although we have seen South Asian suppliers offering minor (-1 to -2c/kg) additional

price incentives. Local EU suppliers of PTF have held steady with June and July showing

almost static PTA / MEG costs but with some small uplift projected for August. Where

contracts are based on retrospective raw material clauses (e.g. in some auto upholstery

sectors) we may see Q3 increases of (+1-2 euro c/kg). But in broader EU markets the

firmness of current oil prices have headed off any structural basis for Q3 reductions

although, inevitably, the slow mill demand of the holiday period will deliver some spot offers

for mainstream PTF yarn types.

0

250

200

150

100

50

Ktes

to Apr-1520142013 to Apr-162012 20152011

42% 44%

66%

56%

33%

53%

62% 58%65% 67%

38%

47%

34%

35%

Domestic

Imports

Source: OTEXA, FEB

High import

penetration

flattening

Brazil

automotive

output turns the

corner

Lacklustre PTF in

Europe, and

Brexit brings

uncertainty

POLYESTER CHAIN

13


The Prevent Group has around 20% share of the European auto textile upholstery

business and is one of the four major auto upholstery suppliers in the region. Prevent has

recently purchased the Car Trim Group of Germany which operates three plants in

Germany, two in the Czech Republic and one in Bosnia. It is interesting to note that Car

Trim primarily use leather and Alcantara rather than conventional textiles, giving Prevent a

fuller product offering opposite the luxury car companies.

In its Annual Report the ITMF publishes global statistics on the number of draw texturing

spindles shipped to each country, broken down by Single or Double Heater, which are

typically for nylon and polyester respectively. If we assume an average of 240 spindles per

machine, there were 1342 new polyester machines shipped in 2015. Based on a

production rate of 800 metres/min and 100 denier this would be 1.4 million mt of capacity.

As expected China is the primary destination for new DTY machines (57%), but volumes

are down. If we compare to the period 2006-2014 China received an average of 1218 240-

spindle machines, whereas in 2015 the total was only 760 machines. Europe / Turkey

accounted for 8% of global polyester texturizing machine shipments in 2015.

Shipments of Polyester DTY Machines in 2015 by Destination

EUROPE POLYESTER INDUSTRIAL FILAMENT

Despite the apparent stability of PIF prices in the Asian region, European customers have

come under sustained pressure from the major Chinese suppliers for increases of +6-7

euro c/kg for 1100 decitex low-shrink deliveries to take effect over end-June / July

deliveries. The claims of imminent disruption to production during Q3 in Hangzhou (before

and during the G20 summit) are insistently repeated and some European traders have

begun to accept higher prices on the basis that they need to secure short-term product

availability. In general, however, there is scepticism that an over-supplied Asian PIF

industry can really justify these increases opposite a short-term production hiatus.

Domestic European PIF pricing is substantially in rollover mode as prospects for a genuine

structural lift in Chinese PIF import prices have declined. Latest forecasts show almost

stable European raw material costs into Q3 and this has removed the rationale for any price

lift by local suppliers, even in the HMLS sector.

The German industrial textile business has shown a significant consolidation with the large

Olbo / Mehler group (OMT) linking up with Synteen / Luckenhaus (SL). Olbo / Mehler are

better known for their very heavy denier mechanical rubber goods (MRG) and single-end

3%

57%

5%

S.America

Africa

N.America

Turkey

Rest Asia

Europe

Japan

India

China

Source: ITMF

Number of

spindles shipped

shows China

takes most but

the number has

fallen

PIF Europe

import prices

talked up on

back of G20

POLYESTER CHAIN

14


cord activity, while Synteen and Luckenhaus are largely involved with lighter denier broad

woven industrial products, even moving into fine denier industrial (LDI) in the case of

Luckenhaus. The combination of these two groups creates a very powerful industrial textile

unit with a quite uniquely broad product portfolio.

In another revealing move, sewing threads manufacturer the Coats Group has announced

its recent purchase of Gotex of Barcelona. Gotex is a producer of speciality yarns and

tapes using raw materials such as aramids and carbon fibre, and the company will become

part of the Coats Speciality division. For Coats, the acquisition supports a move into more

technical, differentiated markets which contrast with its mainstream polyester and nylon

sewing thread activity. There is little doubt that Coats will use its global leverage to offer

the Gotex product portfolio in a wider range of markets.

POLYESTER: STAPLE

ASIA POLYESTER STAPLE

Chinese polyester staple fibre (PSF) prices have been quite stable, regularly moving

±RMB50/mt and they have fallen overall by -RMB50-100/mt since last month. The stock

level is around 9-10 days and the utilisation rate is around 76%, down -1% on last month.

The market for fibrefill is not good in general but that is a seasonal impact, and stock levels

have reached almost one month. The supply / demand balance has improved and is

favourable when compared with other fibres, partly due to not running older less efficient

equipment unless a boom in demand emerges.

Sinopec’s June PSF price for 1.4 denier semi-dull fibre is quoted at RMB6900/mt, and

RMB7500/mt for 1.2 denier bright, and will likely settle here, as the contract settled price for

another leading manufacturer in June is at the same level, both down –RMB75/mt on May.

Prices for 1.4 denier semi dull virgin spun staple seen in the major Chinese markets are -

Jiangsu / Zhejiang including Shanghai: RMB6600-6750/mt (-RMB50-100/mt on May);

Huabei / Shandong area (north China): RMB6600-6750/mt (-RMB50-100/mt on May); and

Fujian province: RMB6500-6600/mt (-RMB100-150/mt on May).

Polyester Staple Fibre Prices in China (RMB/mt)

Export prices for 1.4 denier virgin staple are at $0.88-0.92/kg FOB China, down -2c/kg for

the lower price in the range. Export prices for virgin 6 denier fibrefill are at $1.09-1.15/kg

down -1c/kg.

How are anti-dumping actions from Pakistan and Indonesia impacting exports PSF from

China? The PSF volume exported to Pakistan in the first 5 months of 2016 was 32ktes,

down -43% y-o-y, but with May up +10% on the 12 month average. The volume exported

to Indonesia was 31ktes, up +115% y-o-y (more than double), and the May volume was up

+144% on the 12 month average. So overall not a huge difference, with Pakistan taking

less PSF from China and Indonesia more.

Type

Fibre chip 6800 - 6950 6075 - 6300 5900 - 5925

6 den hollow 3-D 10200 - 11050 8100 - 8700 8000 - 8600

3 den hollow 3-D 12150 - 12250 9000 - 9300 8900 - 9200

1.4/1.5 den 38mm 7400 - 7700 6700 - 6850 6600 - 6750

Flake 4900 - 5900 4350 - 4450 4400 - 4500

6 den hollow 3-D 7500 - 8100 6800 - 7100 6500 - 6800

1.4/1.5 den 38mm 6200 - 6700 5750 - 6000 5700 - 5900

Recycled

Virgin

material

June-15 May-16 June-16

Chinese PSF

prices stable

Chinese PSF

export prices

ease down

Mergers in

Europe result in

stronger global

players after

consolidation

Stronger May

exports of PSF

from China to

Indonesia and

Pakistan

POLYESTER CHAIN

15


Korean polyester staple fibre prices have shown surprising continuity with June prices for

1.5 denier spinning fibre edging very slightly ahead at $1.03-1.05/kg FOB (+2c/kg). The

biggest challenge is in the Korean low melt fibre (LMF) sector where pricing has lifted by

+5c/kg to $1.20-1.25/kg since the key isophthalate component has risen sharply. Despite

this lift in regional pricing export quotations are being pushed even higher as key LMF

suppliers conclude that earlier margin levels are unsustainable. The unanimity of this

response makes it likely that global buyers will find a tough line on forward pricing.

Complex technology has limited the number of technically capable polyester LMF suppliers:

South Korea, Taiwan and Japan are dominant at 79% of global activity in 2010, still holding

at 72% in 2015 (see graph below). The picture is even more extreme when one recognises

that significant parts of the Chinese capacity are Korean- or Taiwanese-owned. The IPA

cost increase should ameliorate over H2 2016, but PCI Wood Mackenzie believes that

market tightness in IPA supply will return over 2017 / 2018.

Polyester Low Melt Fibre by Country / Region

Toray Chemical Korea Inc has announced that it has successfully developed a hollow,

spiral polyester fibre of 1.5 denier – much finer than conventional filling fibres. The product

is specifically designed to replace feather-based fillings in winter jackets and will clearly

offer reduced bulk and weight while maintaining thermal insulation. This very impressive

technical achievement coincides with significant concerns around the practices in China

associated with harvesting of goose feathers.

Other Asian PSF prices all eased down. Indian domestic PSF spinning product is at

$1.27/kg, with imports at $0.94/kg. Pakistan PSF imports are at $0.90-0.93/kg. Indonesian

PSF imports are at $0.90-0.92/kg, while Vietnamese prices fall to $0.91/kg.

AMERICAS POLYESTER STAPLE

Spinning fibre markets in North America are slow and spinners are generally taking 1-2

weeks off for 4th July, downstream into knitting we have heard of plants closing for 3 weeks.

From a very strong first half of 2015 for domestic producers we are seeing a weak 2016. In

contrast the fibrefill sector has shown good growth in domestic production as both Sun

Fibers and PolyTech have started production since first half of 2015. Nonwoven staple

volumes are up +5.6%. With the increase in domestic fibrefill shipments it is to be expected

that the growth that had been seen in imports will taper off and we will examine this in the

July report. It should be noted that the increase in carpet staple in the graph below is not in

0

100

200

300

400

500

600

700

46%

21%

12%

79%

45%

72%

2010 20152000

17%

2020

10%

Ktes

South Korea

China

North America

Japan

Europe

Taiwan

Source: PCI WoodMackenzie

LMF prices

strengthen as

raw material

rises

Toray achieve

low denier spiral

hollow fibre

staple – a

potential down

replacement

Fibrefill volumes

up but spinning

down

POLYESTER CHAIN

16


conventional broadloom applications but is mainly in needlepunched construction for

automobile applications.

USA Domestic Polyester Staple Shipments by End-use

Domestic pricing in June is generally a rollover from May with a tendency to a weakening

where attempts are made to win back business from imports. Low melt fibre prices have

had 12 months of very poor pricing – generally even below fibrefill price levels as

overcapacity in the global market has led to price cutting. Market demand for low melt is

good as it has found a growing demand in automotive insulation applications and we have

been surprised at the price weakness. We are just beginning to see a slight recovery and it

will be interesting to see if there is a price discipline in the market which will allow prices to

return to their traditional levels. A global tightness in IPA (the ingredient that gives the

lower melt point) is also a justification for higher prices.

Imported spinning fibre is at the same general levels as May in the region of 92-93c/kg FOB

China for semi dull with +7-9c/kg addition for OB. Fibrefill from bottle rPET is in the 51-

53c/lb range delivered to customers and from mixed recyclate in the mid 40’s. The rPET

market has baled bottle raw material rising, but still relatively low level of 10c/lb picked up.

In Latin America the prices for coarser polyester staple fibres for nonwoven and fillings

dropped about -2c/kg offsetting the movement of the virgin staple fibre for spinning use, in

order to preserve its competitiveness against non-regenerated product. Prices for PSF and

even polyester filament yarns from Indonesia eased a little despite good local demand.

Regional spinning fibre quotations are down up to -4c/kg with 1.2 denier at $0.98-1.00/kg

and 6 denier hollow fibre at $0.85-0.95/kg.

EUROPE POLYESTER STAPLE

European PSF buyers have been shocked by the aggressive stance of key Asian suppliers

of low melt fibre. Approximately 5 key suppliers dominate 50% of global supply, with Korea

and Taiwan dominant in this supplier group (see Asia Polyester Staple section). After two

quarters (Q4 2015 – Q1 2016) in which these suppliers have seen prices and margins

plummeting down to almost conventional fibre levels, the market turned in April with LMF

moving ahead faster than standard fibre. Now, this group of suppliers has been demanding

an aggressive price increase of around +10 euro c/kg for June / July deliveries and on a full

quarter basis will essentially achieve this objective. The ostensible reason is the increase

in isophthalic acid (IPA) costs which have risen by +$500/mt in recent weeks: PCI Wood

0

10

20

30

40

50

60

70

80

90

100

110

120

Carpet

Ktes

NonwovenSpinningFibrefill

-21%

+13%

+6%

+31%

Jan-May 2015

Jan-May 2016

Source: FEB

NA PSF prices

flat but weak;

LMF may be

trending up

LMF prices

strongly rising

POLYESTER CHAIN

17


Mackenzie’s calculation suggests that this is equivalent to +5c/kg cost increase in fibre but

the producers are evidently determined to recover margin also. LMF is an absolutely key

product in the nonwovens industry and it is increasingly evident that the core group of LMF

suppliers is not prepared to offer a complex and technically-challenging product at little or

no margin.

In conventional PSF, import offers are stable, with the slight upward pressure on raw

material countering a marginally weaker market Asian demand. EU PSF suppliers have

effectively rolled over mainstream PSF pricing into Q3 2016 since firm oil prices have

closed off the anticipated weakening of European PTA prices. European PSF market

demand remains quite strong and prospects for nonwoven production over H2 2016 are

looking positive.

As shown in the graph below (left hand side), EU28 PSF mill demand is consistently

defending annual consumption of more than 900ktes. PSF import activity in the post-

recession period has been rising at +5% CAGR while regional production has drifted

marginally lower. A similar analysis for Turkey (right hand side) shows a rocketing mill

consumption with +12% CAGR driving surging imports. The toughening Turkish

government stance on polyester imports will certainly endorse the large proposed

investments in domestic Turkish PSF capacities over the next 5 – 7 years.

PSF Textile Mill Consumption, Production, & Trade

NYLON: RAW MATERIALS

Soft market conditions have seen benzene contract prices come under increasing pressure

since the gains made in the April settlements. All contract indices fell in May, and again in

June. There should be some upside in the July settlements based on recent spot price

movements but the surprise result of the UK referendum has injected turmoil into the

markets. Spot prices in Europe remain the highest of the three major trading regions, but

have shown a tendency to move more towards the other regional spot benchmarks. In the

US, spot prices remain globally the lowest and have tended to hug trends in the energy

arena through the month of June. Spot prices in Korea initially showed more propensity to

track with European spot prices but underlying weakness has taken its toll here too. Were

it not for a pre-Brexit run-up in energy prices, the trend seemed to be one of weakening

differentials to energy. The huge volumes of deep-sea product which moved into the US

Source: Official trade data, GTIS, PCI Fibres Red Book 2015

0

100

200

300

400

500

600

700

800

900

1,000

1,100

0

100

200

300

400

500

600

700

800

2011 20122006 2013

+1%

2007 2014 20152008 2009 2010

KtesKtes

Production Export (RHS)Import (RHS)Textile mill consumption

0

100

200

300

400

500

0

50

100

150

200

Ktes

2014201020092008 2012 20132007

+12%

20112006 2015

Ktes

EU28 Turkey

Rising PSF

imports in EU28

but much higher

in Turkey,

supporting the

coming local

investment

NYLON CHAIN

18


market during the first quarter continue to distort the inter-regional price relationships and

prompt aggressive efforts to move US benzene derivatives back into the export markets.

Contract price benchmarks for June settled at $637/mt equivalent in Europe (€572/mt),

$615/mt in Asia (Nippon Oil regional contract) and $598/mt in the US. The markedly lower

settlement in the US was reflective of the market trying to resolve high inventories, steady

incremental production and robust import volumes. June is normally the last hurrah for the

US gasoline season from a refiner’s perspective, and a time when the global aromatics

markets look to the US for direction. This year the anticipated rally has been disappointing,

snuffed out by the bleeding off of widespread speculative inventories of blending

components. In the Europe, on the other hand, gasoline alternatives have tended to lend

modest support to aromatics values but only to the point of helping maintain benzene prices

at premiums to the other regions. Lastly in Asia, margin fundamentals have deteriorated

through the month of June relative to the other regions. This likely reflects the market

looking to limit incremental output where it can, but the by-product and co-product nature of

most production negates the direct impact of such margin pressures, and the impending

start-up of new co-product capacity does little to help.

As far the near-term outlook is concerned, underlying energy price volatility is likely to

distort aromatics prices as the markets absorb the fallout from the UK referendum. Wood

Mackenzie has been calling for a steady appreciation in crude and refined product prices

for the balance of the year but we should all be conscious of the uncertainties which now

undoubtedly prevail.

In spite of progressive weakening in underlying benzene prices, Asian caprolactam

producers attempted to lift prices again this month, on the basis of a tightening supply /

demand balance. Owing to a combination of very low prices and an extensive shutdown

schedule in Europe, very little export material is available currently in the Asian market and

local producers have been unable to fill the gap. Although demand remains disappointing,

the loss of export material has been more severe, so supply has become more constrained.

Hoping to capitalise on this, initial price nominations were made at $1350/mt (an increase

of +$45-100/mt over May settlements). These nominations were rejected universally by

buyers, who were seeking prices closer to rollover. As it currently stands, price ideas

remain polarised and one major buyer in Taiwan is talking about skipping June contracts

altogether.

At current prices, this is no idle threat. With PA6 polymer prices now in the range $1450-

1500/mt, the initial CPL nomination would equate to a total price spread of $100-150/mt,

which is well-below the cash cost of conversion. Even at prevailing spot prices of $1240-

1250/mt, currently the lowest option in the market, the PA6 price spread range is only $200-

260/mt, which is at or below the cash cost of conversion for most producers. We therefore

have a situation where neither the CPL sellers, nor the CPL buyers / PA6 polymer sellers

are making any return whatsoever.

In China, Sinopec initially nominated June contracts at RMB10400/mt at the end of May,

which was revised upward during the second week of June, but Sinopec did a u-turn, and

finally settled all contracts at RMB10350/mt (+2.5% over May). The price ideas of Fibrant

(DSM/Nanjing) followed a similar pattern. After initially nominating June contracts at

RMB10500/mt and settling at RMB10400/mt.

In Europe, CPL contract price negotiations continue. Sellers opened the process with

nominations of rollover (versus a benzene feedstock price fall of -€27/mt), while buyers

countered with reductions of full-benzene. At the time of going to press most negotiations

had begun to centre in the range -€10 to -€15/mt.

Underlying

benzene prices

weaken

Higher CPL

prices being

resisted

European CPL

rollover resisted

as benzene

eases

NYLON CHAIN

19


The PA66 world went into turmoil again this month following Invista’s announcement on

the 22nd of June that it was declaring Force Majeure (FM) on both adiponitrile (ADN) and

hexamethylene diamine (HMD). This declaration relates to unspecified technical problems

at the company’s plant in Victoria, Texas. Unconfirmed reports suggest that the ADN unit

at Victoria (allegedly the origin of the problem), remains on-line and running, albeit at

reduced rates of output. At this point neither sales allocation levels nor any estimates of

how long the FM will remain in place have been released to customers. Given that the

Victoria ADN plant is the second largest in the world (22% of world capacity) and that the

largest plant, Butachimie in France with 29% of world capacity, is currently off-line for

scheduled maintenance, the timing of this development could hardly have been worse.

Fortunately Butachimie is scheduled to return to service this week and, if this goes to plan,

it will help to calm the situation. Up until the Invista announcement, PA66 prices had been

trending slowly lower, but this is expected now to reverse. Several PA66 producers are

believed to be considering July price increases of +$50-100/mt.

NYLON: FIBRES

ASIA NYLON TEXTILE FILAMENT

The market in China is at a low and most prices fell by -RMB100-200/mt on May, but as

much as –RMB500/mt for finer denier DTY. There are no lustre products to stimulate nylon

purchases, and few promotions for sportswear made of nylon, although nylon is considered

to be more suitable for this application due to better durability, elasticity recovery, soft

handle and anti-pilling. Despite support from government finance and banks many

companies struggle to survive. Nylon filament average utilisation is around 73% and the

stock levels around 34 days. Some factories in Fujian province are running at over 90% of

capacity, but many are only under 50%.

Selected PA6 Textile Filament Prices in China (RMB/mt)

It is considered that there is little room for nylon fibre prices to fall further because polymer

and CPL prices are firmer. There are not the same CPL and benzene margins available as

were seen in 2012-2014, to absorb further losses (see graph on the following page). In

addition, the downstream circular knitting, conventional covering and lace industries are

running at 40-50% utilisation, which is already the lowest level of the year. Utilisation of air

covering and warp knitting has been improved by about +10% on last month, reaching

around 70% for major manufacturers, which may underpin current prices. As things stand

NTF yarn margins are certainly tight, and in Q2 2016 are -18% down on levels of a year

ago according to PCI WoodMackenzie’s calculation (see graph).

The demand for printed nylon Taslon fabric is still not bad. The warp is 70 denier FDY and

the weft is 160 denier ATY, and the fabric is mainly for outerwear, sportswear and shorts

usually worn at the beach. There is an elastic nylon woven fabric which is popular in the

market recently, consisting of 85% nylon and 15% spandex (40 denier nylon and 20 denier

spandex) with 80g/m2 fabric weight, suitable for casual clothes and sportswear.

Type Denier

40f12-14 16500 - 17000 16500 - 17000

70f24 14800 - 15200 14700 - 15000 -100 -200

POY 86f24 14000 - 14400 13800 - 14300 -200 -100

30f10-12 20500 - 21500 20000 - 21000 -500 -500

40f12-14 19500 - 20500 19000 - 20000 -500 -500

70f24 16300 - 16900 16000 - 16500 -300 -400

FDY

DTY

May June Change

FM at INVISTA

Victoria Texas,

on ADN & HMD

NYLON CHAIN

20


Price Spreads in Asian PA6 Textile Chain

Taiwan is exporting -8% less y-o-y, and especially less to China which has become a net

exporter (already in February to May 2016). Taiwan exports to China are -8% down to April

and were -28% down in 2015. China’s own exports up to May are up 23% and prices are

down.

The China market for nylon staple is dull and the downstream customers purchase only to

satisfy their immediate need. This contrasts with the period of October 2015 - January

2016 when the market was so good and staple manufacturers could make RMB5000/mt

gross margin. The conventional covering sector is now only running about 50% utilisation,

so nylon staple demand has obviously shrunk. In addition, nylon staple capacity has been

enlarged by +130% over the last year. The prices for 1.5 denier staple settled at

RMB12800-13200/mt, down -300-700/mt on last month.

Jiangsu Anheng has planned to install a staple line with annual capacity of 12ktes.

ASIA NYLON INDUSTRIAL FILAMENT

The market in China is still weak but improved compared with last May, with both NIF

demand and prices stable, and the supply balance much better than nylon textile filament.

NIF is still running a high utilisation, around 80%, up about 3% and the stock level has been

reduced by 1-2 days on last month, at current 18-19 days. However, with the slight

improvement, the industry people are not optimistic since the slack season for automobile

industry will be in July-August.

Prices for Tyrecord Yarn & Fabric in China

The prices for 1260 denier industrial filament, high end are settled at RMB15200-15600/mt,

up +RMB100/mt on last month for the higher end of the price range. The prices for 840

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Jul-

15

Jan-

14

Oct-

15

Jul-

14

Apr-

15

Jul-

13

Apr-

13

Apr-

16

Oct-

12

US$/mt

Jul-

12

Jan-

15

Jan-

13

Jan-

16

Apr-

12

Jan-

12

Oct-

14

Apr-

14

Oct-

13

PA6/CPL

NAP/Oil

BZ/NAP

CPL/BZ

OPEC Oil

TF/PA6

Denier Product

6 840 Yarn 15700 - 16000 15700 - 16000 2.15 - 2.19 2.14 - 2.18 -0.01 -0.01

6 1260 Yarn 15200 - 15500 15300 - 15600 100 100 2.04 - 2.10 2.03 - 2.09 -0.01 -0.01

6 840 Cord 21300 - 21800 21300 - 21800 2.85 - 2.90 2.83 - 2.88 -0.02 -0.02

6 1260 Cord 19800 - 20000 19800 - 20000 2.60 - 2.66 2.58 - 2.64 -0.02 -0.02

66 840 Yarn 3.07 - 3.12 3.07 - 3.12

66 1260 Yarn 2.93 - 2.98 2.93 - 2.98

66 840 Cord* 3.96 - 4.11 3.96 - 4.11

66 1260 Cord* 3.60 - 3.75 3.60 - 3.75

PA

Type

RMB/mt $/kg FOB

June Change May June ChangeMay

NTF margins in

Asia reduce

pricing flexibility

NIF demand in

Asia improves

and utilisation in

China is at

around 80%

NYLON CHAIN

21


denier filament are settled at RMB15700-16000/mt, same as last month. The prices for

tyrecord, high end are RMB19800-20000/mt and RMB21300-21800/mt respectively for

1260 denier and 840 denier, again the same as last month.

To hold market share of exports, the prices for PA6 NIF have been reduced by -1c/kg, to

$2.03-2.09/kg for 1260 denier and $2.14/kg for 840 denier, FOB China port. Export prices

from major suppliers remain stable.

*Note: It has come to our notice that our PA66 tyrecord fabric (TCF) price series for China /

Asia has been compromised by some significant structural changes within China.

Investigations suggest that exceptional offers from new PA66 market entrants over recent

months have delivered an unrealistically low floor to TCF pricing. We propose to adjust our

price series based on mainstream supplier quotations and will advise the results of this

exercise in our July report.

AMERICAS NYLON TEXTILE FILAMENT

Textile filament markets in North America continue to be poor. May had shown a glimmer

of hope for improvement but it did not last. Domestic shipments are down 8% after 5

months and imports are down 5%. We are seeing some pricing aggression in the flat yarn

into warp knit sector particularly for 40 denier and some of this is flowing over into the 70

denier market and is showing in our price tables.

The market has questions over the supply of N66 polymer/filament as a result of the force

majeure issued by Invista on 24th June. An incident at their ADN plant in Texas has

caused a production slow down which has been advised to the market, however there are

not yet any details on the likely extent or duration of the slow down. With imports from

Invista Mexico potentially impacted as well as some of the US domestic textile filament

production from Invista PA66 polymer, it is a concern that we hope will be clarified as soon

as possible.

The demand for nylon filament yarn in Latin America is weak but as local prices are good

the offer from Chinese producers is keen. Offers from China to Latin America have

dropped between -5 to -10c/kg in CIF terms, even though maritime freight rates have

increased during the last two months, leaving prices for 70 denier and 100 denier NTF for

circular knitting at $2.30-2.40/kg.

AMERICAS NYLON INDUSTRIAL FILAMENT

North American domestic shipments remain good and are 5.5% up on 2015 with demand

at the higher denier range particularly good with much of it coming at the expense of

imports, which are down 24%. The cap ply business is strong and the advantages of Nylon

66 in this application are good for the domestic supply chain. Imports from China are down

42%. Nylon tyre fabric imports are consistent with 2015 and annual volumes are typically

around 20 – 22,000 tons, with 70% from Canada and Vietnam.

In lower denier industrial airbag volumes are good but non air bag is weak from military

through sewing thread. Imports from Canada (the main supplier) are surprisingly down by

8%. Many of the auto plants will take 1 – 2 weeks shutdown in the coming 2 months and in

some cases major model changes will be made where airbag sourcing changes may take

place either into using polyester in side bags or changing suppliers. Clearly there has been

a lot of attention on the Takata supply following the massive recalls due to their inflator

problems. The widely reported shift by a number of their traditional customers to alternative

suppliers is not going to take large effect until into the 2018 – 2019 model year changes.

NTF import

prices into Latin

America ease

down

NTF demand

weak in NA,

both for

domestic and

import supply

NIF domestic

shipments in NA

are good and

exports are

down

NYLON CHAIN

22


Industrial filament markets are also concerned over the Invista force majeure referred to in

the Textile Filament section with Kordsa supplied partly by Invista raw materials.

AMERICAS NYLON CARPET FILAMENT

North American carpet filament markets remain generally weak and there is an increasing

feeling that the residential market is at a level which, short of a significant boom in house

building, is where it is going to be for the future. Carpet is a bedroom surface and it is

unlikely that it is going to make any further penetration into other parts of single family

residential. A growing concern is that the commercial carpet market is now under

increasing pressure from alternative surfaces. It is apparent in many hotels that common

areas and in some cases the entrance into bedrooms is now being fitted with hard surface,

particularly LVT (Luxury Vinyl Tile). Of course where LVT is a threat for carpet it is also a

threat for a number of other hard surface floor coverings.

Housing statistics for May were good in terms of new construction starts with the total year

to date up +10% over 2015 and perhaps more significantly the single family component is

up +14.5% where multi family is much lower. Filament consumption into carpet for the first

5 months is remarkably flat compared with last year; at 381ktes in 2016 versus 376ktes in

2015. The mix is also pretty flat with 182ktes PA (48%), 165ktes polyester (43%) and

34ktes polypropylene (9%) in 2016.

Correction from May 2016 issue of FR; on Page 23 last paragraph we wrote “… carpet

and rug still account for 523% of floor covering …”, and it should have been 53%.

EUROPE NYLON TEXTILE FILAMENT

The major European nylon textile filament (NTF) producers achieve acceptable but

unexciting levels of business. However, the NTF industry continues to suffer a series of

small blows which reduce its critical mass and forces it to retreat into ever more exclusive

categories of activity. One of the oldest hosiery companies in Europe – Courtaulds Brands

– has announced receivership in late May. The company advised that it had in turn been

hit by the receivership at BHS, a retail outlet for some of its products, which has recently

gone into liquidation. The company owns some key brands (eg Pretty Polly) which clearly

have significant consumer recognition and it remains to be seen whether these separately

will find a buyer, although currently this appears unlikely. On a more positive note, Nilit has

announced further success for its branded yarn Nilit Innergy, a PA66 microfibre which

incorporates Far Infrared (FIR) properties. The yarn is being used in a new collection by

lingerie and beachwear brand Parah. FIR-containing NTF yarns continue to make

interesting progress in specialist collections in Europe.

June NTF prices have remained stable in the month to date and our PA6 and PA66

quotations are unchanged on the May numbers since raw materials have largely remained

stable. The real test will come over July and August as suppliers seek ways to tempt last

orders out of a European textile system offering heavily reduced demand over the holiday

period. This situation almost invariably induces spot NTF offers which weaken average

pricing.

An analysis of EU28 apparel imports shows that volumes have remained remarkably flat at

around 4.5 million metric tonnes, with China’s declining volume being taken up by

Bangladesh. However, Turkey continues to defend its role as a supplier of better-value

apparel to the European market (see graph following page, left hand side). Apparel where

cotton is more than 50% by weight has reduced its share by -6% since 2010, with majority

MMF-share garments gaining. Also growing is the ‘Other’ category which includes apparel

where no fibre type is dominant, reflecting the increasing use of mixed composition fabrics

Poor PA BCF

sales into

flooring

continue, may

now be

structurally

lower

NTF industry in

Europe shrinks,

success sough in

exclusive areas

Nilit succeeds

with FIR

properties

NTF prices in

Europe are flat

on stable raw

materials

NYLON CHAIN

23


(see graph, right hand side). The improving performance of MMF is of course good for

polyester, but also smaller players such as nylon textile filament and viscose.

EU Apparel Imports by Volume

EUROPE NYLON INDUSTRIAL FILAMENT

European nylon industrial filament (NIF) yarn remains quite firm, driven by sustained tyre

numbers. Plant utilisation is generally good although there are some pockets of spare

capacity where suppliers are seeking other heavy denier opportunity. The pricing

tendencies for Q3 2016 now look set for a rollover, with Chinese competition becoming a

little more active with PA66 tyrecord fabric offered at €4.10-4.20/kg – approximately the

same euro numbers as the dollar price in Chinese markets. Much the same relationship is

true of 940 decitex tyrecord yarn.

European airbag yarn activity remains positive and yarn producers are expecting a strong

H2 2016 after the buoyant H1 2016 conditions. In Europe, as in other regions, the

consequences of the Takata recalls are becoming evident, with pipeline sourcing

arrangements for 2017 and 2018 subject to radical shifts. It is evident that there will be

major winners and losers in this process and we expect to see significant reconfiguration of

European supply chains over the next 2-3 years.

PHP has announced that its nylon industrial yarn has been used in the new Christo

installation on Lake Iseo in Italy (as it has been in several earlier Christo projects). The

yarn is extruded in Germany and has then been dyed gold in a specialist dyehouse. The

project involves a number of floating walkways across this Italian lake covered in high-

tenacity fabric. Thousands of people are making the trip to walk across this installation.

EUROPE NYLON CARPET FILAMENT

European nylon BCF business has shown continuity over June with positive levels of

activity. But the forward outlook has deteriorated and there are indications of reduced

activity over Q3 with some producers expecting a reduction in demand of up to -10% in a

decelerating global economy. The issues around the UK referendum have depressed call-

off of contract carpet in this important carpet-consuming country and the uncertainty around

forward economic arrangements following the BREXIT vote may continue to depress

activity.

3.0

1.0

1.5

0.5

5.0

2.5

2.0

4.0

3.5

4.5

0.0

4%3%

2013

Million mt

51%

0%

40%

2010 2015

22%

9%

6%

20142011 20122009

14%

2008

6%

9%

China

Bangladesh

Turkey

IndiaROW

Pakistan Source: Official trade data, GTIS

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2%1%

14%

20152010 2014201220112009

32%

2008 2013

Percent

28%

58%52%

12%

Other

>50% Wool

>50% MMF

>50% Cotton

By Source Country By Fibre Type EU apparel

imports by

source –

Bangladesh up,

China down,

Turkey holds

share

NIF demand in

Europe is firm in

tyres and

airbags – Q3

prices tend to

rollover

BCF sales

continue but

Brexit brings an

uncertain time

ahead for UK

sales

ACRYLIC & POLYPROPYLENE CHAIN

24


PA6 BCF yarns prices have remained stable over the month with singles 1350 decitex

holding at €2.40-2.45/kg for EU markets and export quotations slightly lower. Current oil

prices are likely to support these price levels moving into July with raw materials not

allowing scope for any reductions.

ACRYLIC & POLYPROPYLENE: RAW MATERIALS

In June, propylene price changes were mixed and limited. The contract price for the

polymer-grade propylene (PGP) in the USA finally settled up +0.5 c/lb (1.5%) compared to

May at 33 cents/lb ($728/mt). The European contract price also increased +€17.5/mt (+3%)

to €652.5/mt ($737/mt at the time of settlement). In Asia, propylene price fluctuated but

overall moved down -$20/mt over the month (3%) to $728/mt.

In all three regions, propylene supply seems to play the main role at the moment. Demand

appears more or less stable, though it seems to be softer in China. On the supply size,

there was a lot of uncertainty. Both propane dehydrogenation units (PDH) in Texas, Dow’s

Freeport plant (750ktes/yr) and Flint Hills Resources’ (FHR) Houston plant (650ktes/yr),

suffered outages in June. The effect of these outages was partially offset by increased

refinery operating rates in the USA, and draining of non-fuel use propylene stocks. So the

increase in the PGP spot price came only late in June, and is unlikely to take hold, thanks

to the restart of PDH units.

The spot price in Europe, however, was affected by supply disruptions, climbing €46/mt

over the month. The most significant of those appears to be the outage of another PDH

plant in Terragona, Spain (350ktes/yr), which belongs to BASF. Other propylene facilities

suffered outage due to the strike in France, including Total’s Feyzin (130ktes/yr propylene)

and Total/Ineos’ Naphthachemie (390ktes/yr) steam crackers. The strike is over by now,

and the crackers are on stream, but it is not clear when Tarragona plant will be restarted.

Asian supply was also somewhat disrupted. There were reports of Ulsan, Korea PDH plant

being restarted following an unplanned outage in May, but the supply situation seems to be

improving, with units resuming production. Chinese domestic supply is seen higher than

demand.

It seems that PDH plant operational issues are recurrent, for various producers in different

regions. The process is relatively new, compared to traditional steam cracking. The latter,

though, may also suffer multiple unplanned outages, as was the case in Europe a year ago.

In such a situation, capacity excess and swing producers such as methanol-to-olefin and

olefin conversion plants may play a positive role in the market. The effect of propylene

supply outages in the USA and Europe on downstream polypropylene may be limited, as

the consumers were able to source PP from Asian imports. However, the expected easing

of supply across the world may result in lower demand for imported PP, causing in turn

lower demand for propylene in Asia and a decrease in propylene price. The oil price

retreating from $50/bbl level may also contribute to the possible correction.

Asian polypropylene polymer (PP) prices in June were stable overall relative to May

prices. Margin increased due to drop in naphtha feedstock costs, increasing the margins

for non-integrated producers. According to Wood Mackenzie capacity data, China is

already self-sufficient since 2015, and traditional suppliers to China (for example Middle

East, S. Korea and Japan) and one export target is North America. June prices initially fell,

for example on weak demand during Ramadan, and recovered at the end of this month (ca

±$50/mt), leaving CFR China prices for polypropylene at $1060-1160/mt as in May.

European

propylene hit by

plant outages

Operational

challenges with

new PDH

technology


25


North American polypropylene prices have seen continued downward pressure thanks to

increased imports since February 2016 and local production rate exceeds sales.

Inventories are as much as 10 days higher than a year ago. We anticipate improved

availability until August 2016 due to robust operating rates and continuing imports into the

United States. For the next 18 months, US domestic prices are expected to be driven by

CFR China prices. This oversupply through imports has led to a drop of up to -4 to -5c/lb

leaves spot domestic polypropylene prices at $1100-1200/mt.

European polypropylene (PP) prices increased +€10-20/mt on the back of supply issues,

ending at €1110-1220/mt. The strikes in France at propylene-producing crackers are

believed to be resolved, with all units having now restarted, but there were Force Majeures

still in effect during the month. The level of other outage activity for June increased with

unplanned cracker outages at BP Gelsenkirchen, Dow Bohlen and planned maintenance at

one BASF Ludwigshafen unit, plus Ineos PP unit in Belgium. Producers have again been

able to maintain the high spreads to propylene monomer, which remain over €500/ton. The

stabilisation of propylene supply could introduce lower pricing power on propylene in the

near-term, with PP prices likely to follow.

Globally a tightness in supply of acrylonitrile (AN) caused spot prices in Europe and USA

to increase during June, with some suppliers being sold out and Asian consumers seeking

large volumes out of America and Europe. Several outages are expected in the coming 6

months, especially in China ahead of the G20 summit, but also others in Taiwan, Korea and

Thailand. The total could be around 75ktes/yr of AN taken off the market in a short period

of time. In response to expected tight supply imports of AN in China ramped up and prices

increasing for coming months. In the other direction, INEOS Nitriles would be restarting its

AN plant of 280ktes/yr in UK after a five week planned maintenance.

ACRYLIC: STAPLE FIBRES

The Chinese asset utilisation rate for acrylic staple fibre (ASF) production in H1 of 2016 at

around 92% is much better than 2104 (80%) and 2015 (87%). This trend will probably end

soon as downstream industries, such as cotton spinning, wool spinning, carpet and fake fur

have only 70% of the order volumes compared with the same period of last year. In

addition export orders are not promising. At current AN price acrylic price levels, the acrylic

manufacturers are probably running at a loss of over RMB1000/mt. The utilisation rate may

drop further, following -10% drop in May. Several of the acrylic producers will need to shut

down production during the G20 period reducing the overall utilisation rate by -20% to 67%

during this period. Some are within the controlled area (e.g. Ningbo, Hangzhou) and others

in regions not included in the controlled area (Anqing, Qilu, Jilin and Daqing).

Summer is a weak season for acrylic fibres although acrylic fibre manufacturers have

sought to broaden their applications. Fine denier fibre can be used for early or late

summer, but is expensive, which limits its acceptance. Acrylic prices have risen due to

higher AN prices. Sinopec East China contract settled prices are at RMB12600-12700/mt

for 1.5 denier staple, and RMB12650-12750 for 3 denier medium-length, and RMB12900-

13200/mt for tow. Chinese export quotes for 3 denier tow are $1.65-1.73/kg, CFR ASEAN,

the same as last month.

After the anti-dumping duties imposed on Japan, South Korea and Turkey in April, total

exports of acrylic fibre going from Japan to China reduced 50% from March to April. In

2015 Japan exported around 76ktes of which about half went to China. Now this extra

+16% to +18% on tariffs to China has created a difficult situation for the acrylic business of

the three Japanese producers: Toray Industries, Mitsubishi Rayon and Japan Exlan.

North American

PP falls on

oversupply

But Europe PP

rises on strikes /

FMs

AN in global

tight supply with

outages to come

Chinese ASF

utilisation high

but slowing

demand

China ADD

hitting ASF

imports


26


Korean ASF prices moved upward in early June following positive raw material signals. For

1.5 denier fibre prices have lifted to $1.90-1.95/kg (+10c/kg). These recovering price points

may test the ability of downstream markets to pass on the increases.

In South America, colder weather during this winter in the southern hemisphere has

helped regional producers and regular suppliers from Europe see better fibres demand.

Demand for acrylic fibre in Europe has improved during the last weeks, with main

producers practically at full capacity trying to deliver orders ahead of summer breaks. With

AN prices rising, prices of acrylic fibre have increased for the third month in a row. Market

players believe prices are reaching the top especially if oil prices have really stabilised, and

they also wish to avoid widening the gap with other cheaper fibres like polyester that have

seen flatter pricing in recent months.

Europe Acrylic Fibre Exports Primary Destinations 2015

Eurostat data provides enormous insight into the pattern of EU acrylic fibre activity (see

graph above). Sales within EU form just 26% of product movement while exports from the

EU form 74% (143ktes/yr). Within the EU, the major acrylic fibre recipients are Romania,

Spain, Italy and UK (although we note that Eurostat data does not record product made and

sold within a single country). 70% of the EU Extra trade is to Turkey, India, USA, UAE and

Mexico. EU acrylic fibre production has clearly pushed hard into fibre specialities and is still

supporting a very substantial export activity, although primarily in the Greater European

region. With prices of acrylic fibre rising again globally in June, Europe saw an increase of

+8c/kg which followed +5c/kg in May. In Americas a larger increase was seen of around

+10 to +15c/kg, and in Asia the increase was not more than +3c/kg. This takes 3 denier

tow in Americas to $1.85-1.95/kg, Europe to €1.85-1.90/kg and Asia to $1.55-1.62/kg.

VISCOSE: RAW MATERIALS

Expectations have weakened in recent weeks regarding the Chinese downstream market

for viscose staple (VSF) but demand for the feedstock, particularly imported VSF grade

dissolving woodpulp (DWP), has remained steady and prices for imported DWP continue to

rise. There has been a +$5-10/mt increase in the Chinese market price for imported

hardwood DWP, which has reached $857/mt, while the price for softwood DWP has risen

by +$20-30/mt to $915/mt, on lower reported transactions versus May. The supply for

0 705550 6040 653530 4510 255 2015

11.9

4.0

1.4

10.5

6.7

France

United Kingdom

Italy

United Arab Emirates

Romania

Ktes

6.4

Mexico

China

Spain

8.6

United States

Turkey 65.0

10.5

8.9

India

17.6

2.0

Portugal

EU28 Intra Trade

EU28 Extra Trade

Source: Official trade data, GTIS, PCI WoodMackenzie

European ASF

running full with

rising prices

EU ASF exports

are core to the

business

VISCOSE CHAIN

27


softwood DWP appears to have become tighter, lifting the premium over hardwood DWP

from $40/mt to $58/mt. Most Chinese VSF mills are compelled to augment their hardwood

DWP feedstock with softwood DWP and these mills have had to accept higher prices for

their feedstock even though VSF prices have edged downwards over the past week,

eroding the VSF mills’ operating margins. The price for domestically produced hardwood

DWP has staged a small rally, rising from RMB6800/mt ($906/mt, VAT excl.) in May to

RMB6880/mt ($894/mt, VAT excl.). Despite depreciation of the Chinese RMB against the

US$, domestically produced hardwood DWP is still supplied at a premium (of $37/mt

compared with $56/mt in May) over imported hardwood DWP.

Chinese Monthly Imports of DWP

The graph above highlights how Chinese imports of speciality and commodity DWP rose to

January 2014, but then commodity DWP (primarily VSF grade) appears to have plateaued,

while imports of DWP from origins that supply specialty grades (notably acetate grade DWP

for acetate tow production) have continued to rise. Chinese acetate tow demand started to

falter in 2015 while viscose grade DWP output continued to rise. The implication is that

speciality DWP mills increased shipments to VSF plants to fill capacity and there was an

increase in supply from domestic DWP mills. There could well be an increase in domestic

VSF grade DWP supply with the start-up of Sun Paper’s new 350ktes/yr Zoucheng

(Shandong) plant in 2015, replacing production at the Yanzhou (Shandong) mill (DWP

capacity of 100ktes/yr). The graph shows a dip in imports at the start of 2016 but these

have largely recovered. With the VSF industry operating at high capacity utilisation rates,

further substantial growth in VSF grade DWP imports could well have to wait for new VSF

capacity to come on-stream.

The price for cotton linter pulp (CLP), the other source of high purity cellulose used as

feedstock by the Chinese VSF industry, also rose, by close to +RMB100/mt. This left the

average price for medium-quality CLP in the Eastern Provinces at RMB6880/mt ($890/mt,

VAT excl.), making the premium over hardwood DWP $34/mt. In Xinjiang Province, now a

major producer of CLP (using cotton linter supplied by the local cotton industry in what is

now the country’s major cotton producing region), the CLP price has reached RMB7650/mt

($994/mt, VAT excl.). Much of this CLP capacity is integrated with VSF mills. The high

price for the CLP feedstock is, however, offset by the central and local government

subsidies used to encourage the development of a textile industry in Xinjiang Province,

some 2,500 miles from China’s east coast. These CLP prices have been kept high by the

tight supply and high price of the cotton linter used to produce CLP, a consequence of the

300

275

250

225

200

0

100

175

125

150

50

25

75

2014Jul 2015 2016Jul2013 Jul

Ktes

DWP Imports from VSF grade producing regions

Total DWP Imports

Source: Official trade data, GTIS

France, Norway, Japan, and the USA not included in VSF grade DWP imports to China

DWP import

prices rise again

in China

CLP prices also

rising

VISCOSE CHAIN

28


decline in pressing hairy cottonseed (available after cotton ginning) to produce cottonseed

oil. The price of cotton linter in the eastern provinces is at RMB4680/mt ($630/mt, VAT

excl.) although tight supply has led to reports of some traders asking for RMB6100-6200/mt

($822-$835, VAT excl.). The scarcity of cotton linter from domestic sources has led to a

large increase in cotton linter imports. The price for viscose filament grade cotton linter is

RMB5650/mt ($760/mt, VAT excl.).

Södra has recently announced a further SEK1.7 billion ($198 million) investment in its

Mörrum mill, for DWP and paper grade pulp, which will raise the mill’s DWP capacity by

+40ktes/yr to 210ktes/yr from November 2017, still focused on the Chinese VSF market.

Another major producer of VSF grade DWP, Sappi Specialised Cellulose, is to construct

a demonstration plant at its Ngodwana Mill (Mpumalanga Province, South Africa) to extract

hemicellulose and lignin from the used digester liquor (brown liquor) from the mill’s DWP

line. The objective is to establish the ability to extract high value biochemicals from this

waste stream. It is also a further demonstration of Sappi’s efforts to establish a more

diversified business platform, with increased expansion in the DWP and speciality paper

business allowing the company to reduce its dependency on the mature markets for coated

papers in Europe and North America.

VISCOSE FIBRES

Weakening downstream demand has ended the improvement in viscose staple fibre VSF

prices achieved at the end of May although low downstream inventories reportedly helped

to cushion the ensuing price downturn. The Chinese market price for medium quality 1.5

denier 38mm VSF was lifted over the last week of May to RMB13700/mt ($1.78/kg, VAT

excl.). Over the last week the price of this VSF grade has slipped to RMB13510/mt

($1.76/kg, VAT excl.), and with DWP prices rising, the operating margins of VSF producers

are again under pressure. Export price for 1.5denieD, 38mm VSF is reported to be in the

range $1.81-1.85/kg (CFR, ASEAN).

There have been few developments through June in the Chinese VSF industry. Sateri has

brought back on-stream the VSF lines at the 160ktes/yr Jiujiang (Jiangxi) mill that were

taken off-line at the start of May for maintenance. Even so, operating rates have

rebounded up to 95%, while stock levels are reported to have risen by one day to 13 days.

In another notable development Sateri has completed the purchase of Linz’s 70%

controlling stake in the fibre spinning company, Linz (Nanjing), which has an annual

capacity of 8ktes/yr. Linz, Austria is Europe’s largest viscose yarn producer. This

acquisition helps Sateri extend downstream its interests in the VSF market. The company

has announced that it is to expand the plant’s spinning capacity and capability by investing

in more spinning machines and in technology.

The move follows a lead from Aditya Birla Group (and its Grasim Industries subsidiary),

which has spinning plants in India, Thailand and Indonesia, processing its own VSF. The

Aditya Birla group has taken this integration further with interests in textile products and

retailing, with the result that the company is integrated from DWP feedstock production

through to finished product and then marketing in its own retail outlets. Water shortages

have compelled Grasim Industries to initiate a phased shutdown of production at its

190ktes/yr Nagda plant in Madhya Pradesh (India). The plant will now remain offline until

the monsoon rains come and replenish the mill’s water supply; these rains have now

arrived. In the meantime, Grasim will sustain VSF supply to its customers using inventory

and does not expect deliveries will be affected, and Grasim will use this downtime for

maintenance.

Chinese VSF

prices slip,

suggesting long

upswing has

ceased

Birla Group

pursues VSF

integration

downstream

SPANDEX

29


Prices in the Chinese viscose filament (VFY) market have been relatively stable in recent

months, despite a weak downstream market and high inventory levels. This stability has

been achieved through maintenance downtime to adjust supply. The average market price

for 120D bright VFY between March and May has been hovering around RMB38000/mt.

Prices have eased downwards through June, slipping to RMB37290/mt ($4.85/kg, VAT

excl.) but this is not expected to herald further declines in VFY pricing. The industry has

also been able to cut inventories by 5 days to 63 days in June, which is well down on stock

levels of over 80 days seen in the second half of 2015.

SPANDEX

The MDI supply situation in China is normal and prices are stable at RMB16500-17000/mt,

but traders are pessimistic as downstream offtake is low. Following last month’s price

decline, PTMEG prices have dropped further. High quality product is at RMB12700-

13000/mt, down -RMB500-700/mt on last month, while the price for lower quality is at

RMB12500-12700/mt, down -RMB500-800/mt. BASF prices are RMB12800-13700/mt.

The spandex utilisation rate dropped -2% to 83% and stock levels are high, at around 55

days, up 1 day on last month. 20 denier prices have dropped -RMB1000/mt, to

RMB34000-38000/mt. 40 denier is little changed but the settled prices tend to the lower

range. For covering and circular knitting 40 denier mainly settled at around RMB27000-

29000/mt, and for warp knitting at around RMB28000-34000/mt. Branded product can

achieve RMB35000-48000/mt. Export quotes for 20 denier are $4.75-6.80/kg, down -

$0.10/kg, while 40 denier dropped to $4.08-5.35/kg.

Current downstream utilisation rates in Jiangsu/Zhejiang provinces for circular knitting are

38% and for conventional covering 50%, while air covering is at 65-70%. In Guangdong,

circular knitting is at 30% and warp knitting at 55%, but expected to increase to 65-70%

soon. Lace knitting in Fujian province is running at 50%. Over 12 spandex companies,

especially in Zhejiang, Jiaxing, Shaoxing and Hangzhou are requested to shut down during

the forthcoming G20 conference, involving nearly 300ktes/yr capacity.

North American markets for spandex are unchanged with little sign of improvement and

one of the large knitting locations is taking 2 weeks down for 4th July. Imports are down

approximately -10%. A bright spot for spandex is in US exports which are up +64% year to

date April with Mexico the largest destination up +192% to 2.7ktes in 4 months.

Spandex demand in Europe has continued its surprisingly good run over the past month,

with the branded end of the business maintaining better momentum than the lower end of

the market. The commodity end of the business remains prejudiced by heavy competition,

which has provoked some price-cutting for spot volumes but this is certainly not typical of

the more specialist markets. The two major spandex producers in Greater Europe both

appear to be sustaining quite good utilisation rates, but we are now entering a quieter

period prior to summer holidays which may now slow momentum.

Invista’s ongoing consumer research presented earlier this year in Munich continues to

stimulate thinking in the spandex-using industry. The messages indicate that a significant

band of high-value, technology-orientated consumers is emerging whose expectations in

the performance of activewear and athleisure are increasing. Invista’s conclusions logically

suggest that the search for improved combinations of compression, shaping and

temperature management is far from over and significant opportunities for further product

differentiation remain.

PTMEG prices in

China falling but

MDI stable

Spandex pricing

stable / weak

European

branded

spandex

maintains

momentum

COTTON

30


COTTON

Cotton prices have trended higher in most markets over the last month. The Cotlook A

Index (FE), increased +9% from 69c/lb on 20th May to 76c/lb on 24th June, having breached

75c/lb on several days, which last happened in Q3 2014. In India cotton prices are up

+15% in both domestic currency and US$ terms over the same period. Shankar-6 rose

from 9926Rps/Quintal (67c/lb) on 20th May to 11389Rps/Quintal (77c/lb) on 24th June. In

Pakistan prices have been fairly stable over the month at 5500-5600Rps/Maund (65-66c/lb)

and new crop now being offered is commanding higher prices. The China Cotton Index

Type 3128B is up +1.5% in domestic currency and +1% in US$ terms over this period from

12530Yuan/mt (87c/lb) to 12717Yuan/mt (88c/lb).

Reports on the cotton market through the month have continued to highlight the tightness of

supply. The Northern hemisphere 2015/16 crops are now in and there is a 4-5 month

pause before the bulk of next season crop (2016/17) becomes available. Southern

hemisphere crops, from Australia, Brazil and Central Africa, help supplement supplies

during this period but these are nearly fully committed. The situation appears most extreme

in India which plays an important role in the cotton sector. India is the largest cotton

producer and the second largest cotton exporter after the USA. It is the second largest

consumer of cotton after China and the largest exporter of cotton yarn. As recently as

December 2015 the outlook for this season’s crop was 6.2 million mt, this being lower than

the nearly 6.8 million mt of 2013/14 and the 6.4 million mt of 2014/15. The crop however

turned out much smaller than originally forecast with current estimates at just 5.8 million mt.

India is a key supplier of cotton to the large and growing Bangladeshi textile industry,

especially in last 12 months after flooding and pest infestation reduced their own crop.

India supplies cotton to other key textile processing countries in Asia (Vietnam, Indonesia,

Taiwan and Thailand) as well as Turkey. There is concern among the Indian spinning

community of a lack of cotton to supply the needs of all the domestic industry through to

November 2016, should weather patterns continue to reduce output.

The situation in China is a little more stable. Sales from the state cotton reserve appear to

be bridging short-term supply gaps resulting from a smaller harvest and low imports, which

are restricted to the 0.9 million mt WTO quota. China’s cotton production fell from 6.5

million mt in 2014/15 to 4.9 million mt this season. From the reserve 2 million mt are

earmarked for sale, with 0.9 million mt so far sold, and sales continuing to end-August.

There are concerns that supplies may become tighter around October 2016, with the

continuing preferential policy for the development of textiles and clothing in Xinjiang partly

to blame. Since the development of spinning mills in the region, there is less supply of

cotton yarn from Xinjiang to the rest of China and thus China’s cotton yarn imports are

down nearly -20% y-t-d May compared with 2015. Additional cotton from the reserve could

be released, but close inspection limits the amount that can be offered quickly.

According to the latest USDA global cotton supply and demand data, there is little reason

for a tight market on a global basis this season. Although production at 21.4 million mt is -

2.3 million mt below consumption of 23.7 million mt, stocks are ample. These are set to fall

from 24.5 million mt in 2014/15 to 22.2 million mt this season. The current upward pressure

on prices may prove to be a temporary situation, centred on a small number of countries

where lower than expected crops appear to have caught some in the industry by surprise.

On a medium-term outlook however there are significant concerns that the cotton market

may become unbalanced and the destructive price volatility of 2010/11 re-emerge, due to

the combination of continuing low global production and faster than expected reduction in

Chinese stocks. At 21.4 million mt current season production is back at pre 2003/2004

levels. A +1.1 million mt production increase to 22.5 million mt is being forecast for next

Competition for

Indian cotton

supplies – who

gets the

product?

Chinese cotton

reserves

compensate for

heavy fall in

Chinese

production

WOOL

31


season although weather, pest infestation and disease problems could still affect the actual

outcome. Many cotton producers, particularly those in China, India and Pakistan, are

looking to move out of cotton to better paying and less challenging crops. Current prices to

farmers are not attracting more land to cotton.

On the other hand current prices to mills are rising and becoming less competitive with

polyester staple fibre (PSF). The current cotton / PSF price ratio in both Asia and China is

a long way above the level of 2007 when cotton consumption reached over 26 million mt

(see graph below). In June 2016 the Cotlook A Index was 79% higher than Asia polyester

staple, a ratio not reached since June 2011 when cotton prices were coming down from the

March 2011 peak. PSF (and viscose staple) offers lower losses at spinning and fibre

developments such as micro-denier, fire retardant and hollow fibre for moisture

management and insulation.

Cotton Price Ratios to Polyester Staple (USc/kg base)

WOOL

A strengthening currency and declining supplies have been key factors in the Australian

wool auction market. The Australian dollar strengthened +5.3% between 19th May and 23rd

June rising to 0.75 US$/A$ and the Australian EMI (Eastern Market Indicator, the

benchmark Australian wool auction price) fell from 1291Ac/kg clean to 1285Ac/kg over this

period despite a -14% decline in the wool offer compared with a year earlier. The stronger

currency resulted in much higher prices in US$ terms making some buyers, such as China,

careful in their purchases. In US$ terms the EMI increased from 929c/kg clean to 974c/kg

clean, leading to higher than expected weekly pass in rates for the time of year and relative

to the volume on offer (ranging from 5% to 13%). The pass in rate was 6.5% in the week

ending 23rd June when only 22 kbales were on offer, reported to be the lowest in 4 years.

In terms of prices of different wool microns, in Australian currency there were gains for

middle micron wools (over 20 microns) indicative of lower volumes on offer, and losses for

fine wools (19 micron and finer) for which offer continues to increase. According to the

Australian Wool Testing Authority (AWTA) fine wool tested in the 11 months to May 2016

was 18.6% higher than a year earlier. The auction offer this season is so far -10% below

last season and supplies are declining more rapidly towards the end of the season. Only

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2008 2009 2010 2011 20162007

Cotton price / Polyester price

2014 20152012 2013

China PSF (DEL)

Asia PSF (CFR)

Source: Cotton Outlook, PCI Fibres; data to June 2016

For the Asia cotton / polyester price ratio: Asia CFR (Cotlook A Index to Asia polyester staple 1.4/1.5 den)

For the China cotton / polyester price ratio: China DEL (China Cotton Index Type 3128B / China virgin polyester staple 1.4/1.5 den)

Cotton losing

competitiveness

against PSF

BIO-BASED / SUSTAINABLE FIBRES

32


one more week of sales remains for the current season (2015/16) and then there will be

two sales weeks from the 2016/17 season before the auction stops for a three week break

that tends to coincide with summer holidays in the Northern hemisphere. Wool sales

elsewhere are also nearing the end of the current season with auction sales in South Africa

now closed until the 17th of August. Results published by the AWTA confirm that supplies

are declining rapidly with all wool tested in May 2016 down -13.3% on May 2015.

The EMI has risen since mid-2014 suggesting that, demand for wool remains fairly stable

and wool prices have increased to bring demand and lower supply into balance. This

season however, despite the short term volatility caused by exchange rate movements,

there has been little movement in the EMI short-term. In Australian currency it is just +2%

above year earlier levels and in US$ it is at the same level. There is little upward pressure

on prices from wool buyers suggesting that demand is falling to tracking lower trend in wool

supply. Despite marketing efforts, product development and supply chain improvements,

carried out around the world, the outlook for wool fibre remains challenging. Like other

fibres wool needs to adjust to slowing growth in the key Chinese market where data from

the integrated household consumption survey (China National Bureau of Statistics)

indicates that y-o-y growth in spending on clothing and footwear in Q1 2016 has fallen to

just above 0% compared with over 6%. The wool industry also continues to address issues

of animal welfare, as part of the drive to uphold the fibre’s sustainable credentials.


There is a growing expectation, particularly from consumers and legislators in developed

markets, that limited environmental impact results from our use of durable and consumable

products, and that applies from cradle to grave, with the ultimate goal of a so-called circular

economy. The textile industry has made a start on several fronts. One aspect is to secure

consumer confidence through transparency in the supply chain. This is particularly where

supply chains have become very lengthy and extremely complex, as is the case for many

textile products. Chain-of-Custody (COC) documentation has been developed to provide

transparency. These ensure standards are met and claimed objectives are adhered to,

based on a chronological trail which can be audited. COCs were initially developed by the

forest products industry, under pressure from environmental groups like Greenpeace in

response to the boom in illegal logging of tropical rainforests in the 1980s. The threat of

boycotts ensured that retailers sourced timber from certified sources and certification is now

used widely. These COCs have since been applied elsewhere, including the supply of

organic food, and in DWP used in the process to make cellulosic fibre products.

The Better Cotton Initiative (BCI), was established in 2005, with a goal “to make global

cotton production better for the people who produce it, better for the environment it grows in

and better for the sector’s future”. The initiative primarily covers improved farming

practices, with farmers using environmentally friendly methods to reduce water and

pesticide usage and protect natural habitats. Farmers should be able to demand higher

prices for these certifiable products. The BCI also provides a COC, connecting cotton

production with retailers over a long complex supply chain. Retailers involved include Ikea,

H&M, Decathlon, Inditex, Lindex, M&S and American Eagle and major brands include

Levi Strauss, Nike, Adidas and Puma. For organic cotton, the Content Claim Standard

(CCS), introduced in 2004 and managed by the Textile Chain, provides the basis for the

COC. There is also the Organic Content Standard (OCS) that tracks certified organic

inputs and allows products to carry labelling identifying organic content.

Wool adjusting

to slowing

Chinese apparel

growth

Chain-of-

custody (COC)

management is

crucial


33


The textile supply pipeline is complex with raw materials sourced and processed in multiple

locations. It is difficult to distinguish between often fungible commodities, for example

conventional, organic and BCI cotton; or virgin and recycled polyester. This complexity can

provide opportunities for cheating by unscrupulous producers, to use non-specified fibres,

lacking the claimed environmental attributes. New systems are required to provide the

means to track these materials and provide consumers with the reassurance that they

receive what they pay for. Corn (maize) is an example of a fungible commodity where it is

possible to establish a separate pipeline, in this case for non-GMO corn. In the textiles

industry where staple can be blended and spun, some mixing is inevitable, so currently a

mass balance is used to account for the certified fibres entering the textile pipeline.

A novel approach has recently been revealed using DNA authentication technology,

developed by Applied DNA Sciences (ADNAS), a biotechnology company based in New

York (USA). They use a botanical DNA marker (SigNature DNA) to provide encrypted and

unique DNA sequences that can be used as a highly customised tag for a wide range of

products, offering both supply chain security and brand protection. This marker has been

designed to adhere strongly to any natural, manmade or synthetic fibre or textile substrate,

and resists dislodgement by standard textile processes. Initially, ADNAS used fiberTyping

to authenticate native DNA of pima (extra-long staple) or upland cotton. Now the company

has developed similar tags for the textile industry, which can be used right up to the final

product on the retail shelf. The nature of this DNA technology enables the production of a

huge number of discrete, unique tags that can be used to label individual fibre batches, or

to tag fibres with specific finishes or performance claims (such as fire retardant or anti-

bacterial). This type of authentication, could provide a considerable boost to the textile

industry and the development of a sustainable (and closed loop) textile economy.

In late 2015 it was announced that ADNAS had teamed up with Techmer PM, a US-based

manufacturer supplying primarily colour and additive master batch to the plastics industry,

in order to launch an anti-counterfeiting partnership aimed at the fibres industry. In early

June 2016, it was reported that Palmetto Synthetics, a US-based synthetic fibre

manufacturer, was going to utilise SigNature T technology to tag its virgin fibres (including

polyester, PA66, PCT, PTT, PETG, PTB and PLA) as well as recycled polyester fibres, to

assure consumers about the provenance of the products they are purchasing. One way to

improve supply chain security would be to lessen its complexity and length. A recent

development in the manufacture of sports shoes could point the way also for the future

evolution of the textile industry. As discussed in our Leader this month, Adidas has

developed a highly automated production process for shoes, previously a highly labour

intensive process, particular for the production of the shoe’s uppers and its final assembly.

After trials, Adidas is establishing a commercial-scale plant in Germany, close to its

customers. COC will be easy with this simpler production chain.

Adidas recently teamed up with a New York based environmental campaigning group,

Parley for the Oceans, who would supply yarns made from recycled nylon fibre for the

manufacture of a new range of training shoes. The recycled PA is currently made from

fishing nets, collected and cleaned, to remove the smell of fish. The nylon yarn is stitched

into the upper substrate made from recycled polyester to produce a shoe that looks like

“seafoam green”. COC would give Adidas (and Levi’s in their jeans - see FR dated May

2016) a way to substantiate their claim that old fishing nets had been used in the process.

DNA signatures

to track fibre /

textile chain

Adidas launches

sports shoes

based on

recycled PA

PRICE TENDENCIES

34


PRICE TENDENCIES

Prices fell in June as had been suggested last month, but this trend is no longer expected to continue much further into Q3. Our view remains that the supply is outpacing demand for most synthetic fibres, and this should in theory continue to depress prices. However as margins are low, we expect that once again (like after Lunar New Year) the fall in fibre and yarn prices will eventually be arrested by rising crude oil and raw material prices. We have introduced a lower oil forecast to take account of uncertainties following the Brexit vote in the UK last week. We expect that oil prices will fall further from the current mid $40’s/bbl in the coming weeks and then recover but remain under $50/bbl in 2016. Oil will then fall off again through early 2017 on temporary supply surplus. Fibre prices will be carried along as oil reflects the uncertainties ahead, and we expect a slow but steady rise in prices through to the year end. Some product lines in Europe, North America, Taiwan and Japan are sufficiently differentiated to avoid closely following China pricing, and premiums can still be enjoyed, if the customers’ real alternatives are properly understood. A Regional Polyester Chip Prices B Asia Staple Prices

C Asia PCI Fibres Index vs Polyester D Selected Keqiao Fabric Indices (Price)

600

800

1,000

1,200

1,400

1,600

1,800

2,000

0

2,500

5,000

7,500

10,000

12,500

Jul-15Jul-13 Jul-14 Jan-16Jan-14 Jan-15

RMB/mt$/mt

China (RHS)

Asia

Europe

USA

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

Jul-15Jan-15Jul-14Jan-14Jul-13 Jan-16

US$/kg

Polyester

Viscose

Cotton A Index (FE)

100

105

Jan-15Jul-14Jan-14Jul-13

95

90

85

80

75

70

65

60

0

Jan-16Jul-15

Index Jul 2013 = 100

150 POY

Asia PCI Fibres Index

1.4 den staple

92

94

96

98

100

102

104

106

108

110

1/1

/2014

1/7

/2013

1/1

/2016

1/7

/2015

1/1

/2015

1/7

/2014

1/1

0/2

013

1/4

/2014

1/1

0/2

015

1/1

0/2

014

1/4

/2015

1/4

/2016

Index 07/01/2011 = 100

Polyester fabric

Polyester/cotton fabric

Cotton fabric

PRICE TENDENCIES

35


E China Polyester POY (resultant 150f96) F China Polyester Staple (1.4 denier)

G Regional Polyester POY Prices (resultant 150f96) H Regional Polyester Staple Prices (1.4 denier)

Fibre 150 1.4 150 150 150 1.4 1.2 1.4

Chip POY Staple POY POY POY Staple Staple Staple

China China China Asia/FE USA W Eur Asia/FE USA W Eur

RMB/mt RMB/mt RMB/mt $/kg $/kg €/kg $/kg $/kg €/kg

May 7250 8400 7975 1.28 2.29 1.52 1.19 2.09 1.57

Jun 6875 7350 7550 1.19 2.29 1.53 1.14 2.09 1.60

Jul 6625 7200 7050 1.14 2.38 1.53 1.07 2.18 1.60

Aug 6260 6900 7025 1.03 2.38 1.48 1.02 2.12 1.55

Sep 6163 6850 7075 1.01 2.27 1.44 1.00 2.01 1.50

Oct 5860 6850 7075 1.01 2.20 1.40 1.00 1.94 1.45

Nov 5838 6575 6950 0.98 2.16 1.40 0.99 1.91 1.46

Dec 5588 6300 6575 0.95 2.14 1.39 0.96 1.87 1.45

42370 5275 6250 6300 0.94 2.09 1.37 0.91 1.83 1.41

Feb 5438 6325 6350 0.93 2.04 1.35 0.90 1.79 1.40

Mar 5838 7250 7025 1.01 2.04 1.37 0.98 1.79 1.41

Apr 5975 6825 6875 1.00 2.11 1.38 0.97 1.85 1.42

May 6188 6750 6775 0.98 2.11 1.37 0.93 1.85 1.41

Jun 5913 6525 6675 0.96 2.11 1.37 0.91 1.85 1.41

Tendencies

Jul 5962 6735 6821 0.97 2.13 1.38 0.93 1.88 1.42

Aug 6033 6927 6974 0.99 2.16 1.39 0.96 1.91 1.44

Sep 6228 7145 7191 1.00 2.17 1.41 0.96 1.92 1.47

Oct 6276 7197 7240 1.01 2.18 1.42 0.97 1.93 1.49

Nov 6372 7298 7335 1.02 2.19 1.43 0.98 1.95 1.50

Dec 6326 7251 7291 1.01 2.19 1.43 0.98 1.94 1.50

Jan-17 6234 7155 7202 1.00 2.19 1.43 0.96 1.94 1.49

Feb 6189 7108 7159 1.00 2.19 1.42 0.96 1.94 1.49

Mar 6144 7061 7115 0.99 2.18 1.42 0.95 1.93 1.48

0

4,000

8,000

12,000

Jan-

14

Jul-

13

RMB/mt

Jan-

16

Jul-

15

Jan-

15

Jul-

14

Jan-

17

Jul-

16

Fibre ChipPOY

0

4,000

8,000

12,000

RMB/mt

Jan-

16

Jul-

15

Jan-

15

Jul-

14

Jan-

14

Jul-

13

Jul-

16

Jan-

17

Fibre ChipStaple

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

Jul-

14

Jul-

13

Jan-

15

Jul-

15

Jan-

16

Jul-

16

Jan-

17

Jan-

14

US$/kg €/kg

Europe (RHS)

USA

Asia

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

Jan-

16

Jul-

14

Jan-

17

Jan-

14

Jul-

15

Jul-

16

Jul-

13

Jan-

15

€/kgUS$/kg

USA

Europe (RHS)

Asia

PRICE COMPARISONS

36


Crude Oil Prices Propylene & Caprolactam Prices (Asia, spot)

Polyester Raw Materials Prices (Asia, spot) Staple Fibre Prices (Asia)

Filament Yarn Prices (Asia) Spandex Prices (China, 40 denier)

0

10

20

30

40

50

60

70

80

90

100

110

120

Jul-13Jul-12 Jan-14 Jan-16Jul-15Jan-15Jul-14Jan-13

US$/barrel

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

US$/mt

CPL (contract) Propylene (spot)

CPL Asia not fixed for June

250

500

750

1,000

1,250

1,500

1,750

Jul-14 Jan-16Jan-15Jan-14Jan-13 Jul-13Jul-12 Jul-15

US$/mt

PET ChipMEG (contract)PTA

50

100

150

200

250

Jan-14Jul-13Jan-13Jul-12 Jan-15 Jul-15 Jan-16Jul-14

c/kg

PSF Cotton A Index (FE) Viscose Staple

0

100

200

300

400

Jul-15Jul-14 Jan-16Jan-15Jan-14Jan-13 Jul-13Jul-12

c/kg

NTF (70 den)PTF (150 den POY)

30,000

35,000

40,000

45,000

50,000

55,000

Jul-13 Jul-15Jul-14 Jan-16Jan-15Jan-14Jan-13Jul-12

RMB/mt

l t l 8 1 7 6% a monthly review - pci wood mackenzie · pdf file2 fibres report –june...

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