China to dent global polyester growth in 2020

Chinese polyester market growth is expected to sit at just below 3% in 2020, a marked decline from the strong growth seen between 2018 and 2019. This dip in performance is mainly due to slashed growth for bottle-grade PET, according to Wood Mackenzie.

"While our data indicates a dismal outlook for the Chinese polyester market this year, overall polycondensation run rates are expected to remain above 80%. Polyester fibre utilisation rates are expected to see a small increase of about one percentage point for 2020, hitting 81%. Additionally, the fast-growing PET film segment could see operating rates as high as 96% this year.

“It is the PET bottle segment that is dragging down the whole supply chain, with around 61% of capacities expected to run - a victim of the aggressive additions in capacities over the past three years.

"It's worth noting that, despite a disappointing 2020, Chinese polyester growth will likely bounce back by the end of this year, setting the stage for a recovery in 2021," said Salmon Lee, Wood Mackenzie Head of Polyesters.

Despite China's sluggish growth, the global polyester story is a positive one.

"Global polyester production looks set to flirt with 90m tonnes by the end of 2020. This is a significant milestone for the industry. As recently as 2016, world polyester production was just above 70m tonnes. Ten years ago, production was not even 50m tonnes.

"The fact that global polyester production has almost doubled in a decade speaks volumes about its growth story. While some market players continue to warn about overcapacity for bottle-grade PET and many grades of filament yarns, overall utilisation rates are expected to sit slightly higher year-on-year for 2020, at 73% and 80% respectively.

"More importantly, all polyester fibres, bottle-grade PET and film-grade PET are expected to see a small improvement in utilisation rates globally for 2020, with only the smallish PBT sector performing below average," added Lee.

Headwinds from the broader market, chief among them the US-China trade war, could be a major dampener for the polyester supply chain.

“If the Chinese economy continues to reel under the weight of slowing exports, and the Chinese yuan continues to weaken vis-à-vis major currencies, purchasing power among the Chinese could see a net decrease. If this happened, consumption within the world’s second-largest economy will be impacted.

“International demand for Chinese-made garments and other textile products could also continue to weaken into 2020, as major economies - including the European Union and the US - could potentially see slower growth next year. Indicators such as the Canton Trade Fair, online shopping festivals and the Black Friday and Cyber Monday buying sprees are suggesting that the Chinese textile industry, and in extension the polyester industry, are not performing as well as previously seen,” said Lee.

While the short-term looks challenging for the Chinese polyester industry, the long-term picture is more promising.

“The Chinese polyester industry has proven to be more resilient than many would like to believe, with growth rates above what forecasts have been suggesting.

“Armed with such optimism, the most aggressive market participants are giving a much brighter prognosis for the polyester chain in 2020 and beyond - especially for suppliers of polyester products. Pointing to the market for polyester raw materials, 2020 may see one of the best years for polyester procurement managers,” added Lee.