Industry Operation: Focus On The Operation Of Chemical Fiber Industry In The First Half Of The Year

In the first half of the year, unexpected factors such as the rebound of domestic epidemic situation and international geopolitical conflicts have brought impact on China's economic operation, and the development faces constant risks and challenges. In this context, the crude oil price fluctuates greatly, the downstream demand continues to be depressed, and the overall production and operation situation of the chemical fiber industry is grim. However, under the support of a series of "stable growth" policies and measures, the main operating indicators of the textile industry have rebounded under pressure. It is expected that in the second half of the year, with the further implementation of policies and measures, more positive effects will be brought to the stable operation and recovery of the industry.

I. Basic Situation of industry operation

(1) production and marketing

In the first half of the year, the overall operating load of the chemical fiber industry was weaker than that of the same period last year, especially after the middle of March, and since then, the chemical fiber industry has maintained low load operation. According to the data of the National Bureau of statistics, the year-on-year growth rate of chemical fiber production has been slowing down since this year (Figure 1). From January to June, the chemical fiber output reached 33.67 million tons, achieving a weak positive growth year-on-year, and the growth rate from January to June was slightly higher than that from January to May.

Figure 1: year on year growth of chemical fiber output in 2022

In the first half of the year, the terminal texturing and weaving were affected by orders and high inventory pressure, and the starting load was weak, and the demand for chemical fiber continued to be depressed. Therefore, the production and sales pressure of the chemical fiber industry was relatively high, and the inventory of polyester staple fiber and viscose staple fiber was relatively low (Fig. 2).

Figure 2 inventory of main chemical fiber products since 2020

　　 （2） Market price

Since 2022, the crude oil price has remained high and fluctuated greatly. WTI futures in early March and early June broke through $120 / barrel twice, and then showed a downward trend of shock. At the end of June, it dropped to $106 / barrel and further dropped to around $94 / barrel at the end of July, with a decrease of more than 20% compared with the peak price in June, The chemical fiber market represented by polyester fiber also showed a high volatility trend (Figure 3). On the one hand, although the high crude oil price forms a certain support for the chemical fiber price, the downstream demand continues to be depressed, and it is difficult for chemical fiber enterprises to smoothly transmit the rising costs downward. Therefore, the price increase of chemical fiber products is generally less than that of upstream raw materials (table 1), and the profit space is squeezed; On the other hand, the price fluctuation of raw materials and chemical fiber products increases the difficulty of enterprise's market judgment and production management.

Figure 3 price trend of international oil price, PTA and polyester POY since 2020

Table 1 price changes of main chemical fiber products and raw materials in the first half of the year

　　 （3） Import and export

According to the statistics of domestic chemical fiber products, the domestic demand for chemical fiber products decreased by 37.6% compared with the same period of last year, which reflected that the domestic demand for chemical fiber products decreased from 1% to 6%. Under the difficult situation, the chemical fiber export still achieved positive growth. The total export volume of main products increased by 2.8% from January to June, reflecting the increase of international market demand and the improvement of China's chemical fiber product competitiveness. It is particularly worth mentioning that in the past two years, the export volume of polyester bottle chips has been outstanding, with a year-on-year increase of 36% in 2021 and 45% in January June 2022.

Table 2 import and export of main chemical fiber products in the first half of 2022

　　 （4） Terminal market

From the perspective of terminal consumption, the domestic demand market once fluctuated under the impact of multiple outbreaks. Since May, with the effective control of the domestic epidemic situation, the national "promotion fee" policy has been effective, and domestic textile consumption is recovering. According to the data of the National Bureau of statistics, the retail sales of clothing, shoes, hats, needles and textiles of units above the national quota decreased by 6.5% year on year from January to June, but the decline rate was 1.6% lower than that of January to May this year; The growth of online retail channels was relatively stable. In the first half of the year, the retail sales of online wear goods increased by 2.4% year-on-year, 1.5% higher than that in the first quarter of this year, reversing the negative growth trend since April.

The export volume of China's textiles and clothing reached 156.49 billion US dollars from January to June, an increase of 11.7% over the same period last year. Supported by the rising export prices, the export volume reached the highest level in the same period of the previous year. Among the export products, the export value of textiles was 76.32 billion US dollars, an increase of 11.3% year-on-year; The export value of clothing was US $80.17 billion, up 12% year on year. In the export market, the textile supply chain of Southeast Asia and other countries has basically returned to normal operation this year, driving China's exports of yarn, fabrics and other supporting products of the industrial chain to achieve a good growth. From January to June, China exported 27.71 billion US dollars of textiles and clothing to ASEAN, with a year-on-year increase of 23.3%, of which the growth rate of yarn and fabric export reached 29.9% and 24.6% respectively; China's exports to the member countries of the regional comprehensive economic partnership agreement (RCEP) reached US $45.57 billion, a year-on-year increase of 13.7%, indicating that the entry into force and implementation of RCEP is conducive to stable and better export environment.

　　 （5） Economic benefits

In the first half of the year, the profit space of the chemical fiber industry was compressed. At the same time, due to the high base in 2021, the profit decreased significantly year on year. According to the data of the National Bureau of Statistics (Table 3), from January to June of 2022, the business income of chemical fiber industry was 536.7 billion yuan, with a year-on-year increase of 10.61%; The operating cost increased by 16.35% year on year, 5.74 percentage points higher than the growth rate of operating income; The total profit was 16.4 billion yuan, with a year-on-year decrease of 51.16%; The loss of the industry reached 33.54%, and the loss of loss making enterprises increased by 82.68% year-on-year, significantly narrowing by 88.32 percentage points compared with January to May.

Table 3 economic benefits of chemical fiber and related industries from January to June

　　 （6） Investment in fixed assets

According to the data of the National Bureau of statistics, the fixed assets investment in the chemical fiber industry increased by 31.9% from January to June, which was basically the same as the growth rate of the whole year in 2021 (Figure 4). To some extent, it reflects that the enterprises have enough confidence in the future development.

Growth of fixed assets in chemical fiber industry since 2008

　　 2、 Forecast of industry operation trend in the second half of the year

　　 From the cost side, the crude oil market in the second half of the year is mainly affected by geopolitical conflicts and interest rate hikes by the Federal Reserve. However, the uncertainty is still strong, but the probability of being short is increasing. It is expected that the crude oil market will continue to fluctuate in a wide range. The price center may be lower than that in the first half of the year, and the possibility of a sharp drop is not ruled out. The drop of crude oil price will reduce the pressure of raw material cost and energy cost of chemical fiber enterprises, but enterprises need to control the inventory and be alert to the impact of inventory depreciation on the book benefit of enterprises.

From the consumer side, the textile industry has shown signs of gradual improvement, with a good foundation for recovery. In the second half of the year, it is expected that with the continuous performance of a series of solid and stable economic policies, China's macro-economy is expected to further stabilize and recover, providing a solid foundation for the improvement and recovery of domestic demand market and the smooth circulation of production and demand; At the same time, the textile domestic demand market is expected to achieve a weak recovery in the "golden nine silver ten" traditional peak season; The foreign demand market is facing competition from Southeast Asia and other countries. It is expected that China's textile and clothing exports will maintain a stable growth pressure in the second half of the year.

On the whole, it is expected that the operation pressure of chemical fiber industry in the second half of the year will still be great, and the industry will continue to move forward with heavy load. It is expected that the operating income of chemical fiber industry will continue to grow year on year, and the overall profit level is expected to improve compared with the first half of the year.

Enterprises in the industry should have firm confidence, believe that difficulties are temporary, and that the industrial foundation and industrial advantages formed by years of accumulation of China's chemical fiber and textile industry are still outstanding. In the face of uncertainty, it is suggested that enterprises should pay attention to both risk prevention and internal training, actively implement the overall requirements and key tasks of the guiding opinions on the high quality development of chemical fiber industry, stride forward to high-end, intelligent and green high-quality development, and meet the victory of the 20th National Congress of the Communist Party of China with practical actions!

(source: China Chemical Fiber Industry Association)