Fibres Global Monthly Market Overview - · PDF file• Polyester raw materials leave fibre chip higher in ... does not represent the broad AN market in Asia which is subject to wider

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Fibres Global Monthly Market Overview July 2017 No. 347 A Review of the Fibres Industry

Report News World PA6/PA66 Supply Demand Report Yellowbook 2017 - available World Fibres Supply Demand Report Red Book 2016 - available Spandex Report 2017 - available


2 Fibres Report July 2017 © Verisk Analytics. Inc. All rights reserved

Fibres Report Headlines

• Polyester raw materials leave fibre chip higher in Asia where polyester fibres markets are buoyant and prices are rising.

• China notified the WTO of its intention to ban some waste imports by end 2017, which would dramatically impact supply of rPET recyclate.

• India‘s implementation of Goods & Service Tax (GST) has raised questions on the different rates set for various fibre types.

• DuraFiber (global supplier of high-tenacity polyester fibres) will close its 3 US sites in September unless a buyer is found. The Mexican site may be bought by IVL but the future of the European sites is not clear.

• Benzene is still falling and pricing is expected to be volatile ahead. PA6 prices rise in Asia narrowing gap to PA66.

• Key Safety Systems (KSS) will complete the $1.6bn purchase of Takata, expected to be concluded in Q1 2018. Meanwhile a driver was killed in Australia apparently by an exploding refitted inflator.

• Spandex – Invista‘s process to sell its Apparel business (including Lycra) may be approaching a deal, though details are still not clear.

• Cotton - tight supplies for nearby shipment offer support to cotton prices at the end of the 2016/17 season.

News Prices

Note: For prices expressed in $ (and c) refer to USD, unless otherwise specified. For weights 1t = 1000kg = 1tonne 1kt = 1000t 1Mt = 1000kt For capacity ktpa = kt per annum Mtpa = Mt per annum

Product Reference Unit Jul Jun

Month-on-month Price

Change

Month-on-month Price Change (%)

Crude Oil OPEC Ref.basket $/bbl 46.35 45.21 1.14 3%Propylene Asia, CFR, Spot, mp $/t 870 873 -3 0%Caprolactam Asia, CFR, Contract, mp $/t NF 1560 - -PTA China, CFR, Spot, mp $/t 698 645 53 8%MEG China, CFR, Spot, mp $/t 832 784 48 6%PES Chip Asia, CFR, Spot, mp $/t 922 873 49 6%Polyester Fibre Asia,150 den POY, mp c/kg 112 107 5 5%Polyester Fibre Asia, 1.4 den, mp c/kg 103 97 6 6%Nylon Fibre 70 den weaving, mp c/kg 263 255 8 3%Cotton Cotlook A-Index (FE) c/lb 84 85 -1 -1%Viscose Fibre China, 1.5 den, mp c/kg 198 188 10 5%Spandex China, 40 den, mp RMB/mt 38,000 39,000 -1000 -3%mp = mid-point



Raw Material Prices (1)

Notes 1 The China domestic price for acrylonitrile (AN) is shown in RMB/t which, after excluding the VAT, is converted to $/t 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. 2 The USA acrylonitrile price is not a market price but a cost-based index, reflecting only movements in feedstock costs.

* = Provisional †= Revised NF=Not Fixed

Product Region Terms Unit Jul-16 Q2 2017 Jun-17 Jul-17Dissolving Wood Pulp

(DWP) US$/t $/t 887 849-936 849 871

Asia CFR Spot $/t 740-760 815-905 840-905 855-885

USA FOB $/t 739 849-1014 849 860

Europe DEL $/t 740 943-973 944 905

Europe DEL €/t 670 840-880 840 790

Asia CFR spot $/t 1,060-1,160 1000-1105 1000-1085 1000-1085

USA DEL $/t 1,090-1,200 1,010-1,160 1,050-1,160 1,070-1,180

Europe DEL $/t 1,227-1,348 1,367-1,504 1,382-1,483 1,375-1,478

Europe DEL €/t 1,110-1,220 1,230-1,365 1,230-1,320 1,200-1,290

China domestic FOB RMB/t 8,800-9,000 11,300-12,450 11,300-11,400 10,600-10,700

China domestic equivalent CFR $/t 1,130-1,150 1,420-1,540 1,420-1,430 1,330-1,350

USA FOB cost-based index $/t 1,139-1,229 1,247-1,559 †1,247-1,347 1,225-1,340

Asia CFR $/t 1,315-1,365 1,500-1,860 1,500-1,620 1,575-1,700

USA DEL $/t 1,553-1,564 1,729-1,822 1,819-1,822 1,819-1,822

Europe DEL $/t 1,632-1,765 2,333-2,598 2,407-2,598 2,373-2,568

Europe DEL €/t 1,477-1,597 2,142-2,347 2,142-2,312 2,072-2,242

Polypropylene

Propylene

Acrylonitrile

CPL



Raw Material Prices (2)

Notes 1 The China domestic price for acrylonitrile (AN) is shown in RMB/t which, after excluding the VAT, is converted to $/t 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. 2 The USA acrylonitrile price is not a market price but a cost-based index, reflecting only movements in feedstock costs.


Product Region Terms Unit Jul-16 Q2 2017 Jun-17 Jul-17China Ex-works spot RMB/t 4,478-4,768 4,618-4,985 4,618-4,798 4,790-5,435

Asia CFR $/t 630 612-640 612 625 *

USA DEL $/t 926 929-962 929 919

Europe DEL $/t 729-772 756-824 756-808 740-785

Europe DEL €/t 660-699 673-764 673-719 646-685

China CFR spot $/t 612-630 670-820 748-820 800-863

Asia CFR announced $/t 760-770 850-1035 850-890 910-960

USA FOB based on announced Asia $/t 814-824 904-1089 904-944 964-1014

Europe DEL $/t 851 961-1012 965 977

Europe DEL €/t 770 859-944 859 853

Asia CFR spot $/t 811-840 857-945 869-878 896-947

USA DEL $/t 1,345-1,389 1,345-1,484 1,345-1,389 1,345-1,389

Europe DEL $/t 1,025-1,092 1,090-1,179 1,090-1,152 1,082-1,145

Europe DEL €/t 928-988 970-1100 970-1025 945-1000Average $ per € 1.11 1.12 1.12 1.15Average RMB per $ 6.68 6.81 6.81 6.78

Exchange rate

MEG

Polyester Chip

PTA



Acrylic / Cotton / Viscose Fibre Prices


Product Region Terms Unit Jul-16 Q2 2017 Jun-17 Jul-17China Domestic/import CFR c/kg 154-169 187-207 188-205 181-198

Americas 3 denier tow CFR c/kg 200-210 225-240 225-235 220-230

Europe 3 denier tow DEL €/kg 1.95-2.00 2.15-2.30 2.15-2.25 2.10-2.20

c/kg 215-221 236-254 242-253 241-252

FE A-Index (avg.) CFR c/lb 81 85-89 85 84

China Cotton Index DEL c/lb 97 104-107 107 106

India Shankar-6 Spot c/lb 87 84-85 84 84

1.5 den CFR c/kg 194-195 183-196 186-190 196-199

120 den CFR c/kg 454-492 452-520 452-509 459-516

Average $ per € 1.11 1.12 1.12 1.15

Average RMB per $ 6.68 6.81 6.81 6.78

Acrylic fibre

Cotton

Viscose (China based on RMB)

Exchange rate



Polyester Fibre Prices


Product Region Terms Unit Jul-16 Q2 2017 Jun-17 Jul-171.4 / 1.5 den CFR c/kg 91-95 94-100 96-98 101-104

6 den solid (fibrefill) CFR c/kg 84-88 94-102 94-101 99-104

4 den binder CFR c/kg 115-120 133-140 133-135 130-135

75 den POY CFR c/kg 104-114 111-126 114-124 121-131

75 den textured CFR c/kg 125-137 130-145 130-141 136-147

150 den POY CFR c/kg 95-102 101-111 103-111 108-115

150 den textured CFR c/kg 114-120 122-136 123-131 127-135

1000 den conventional shrink CFR c/kg 118-123 143-153 143-148 148-153

0.9 den DEL c/lb 83.5-86.0 83.0-88.5 83.0-86.0 83.0-86.0

1.2 / 1.5 den DEL c/lb 82.5-85.0 82.0-87.5 82.0-85.0 82.0-85.0

1.2 / 1.5 den (feedstock linked) DEL c/lb 71.0-72.0 72.8-79.6 72.8-74.8 71.0-73.0

6 den solid (fibrefill) DEL c/lb 71.0-73.0 69.5-76.0 69.5-72.5 69.5-72.5

4 den binder DEL c/lb 62.0-67.0 70.5-79.0 70.5-75.0 68.5-73.0

70 den POY DEL c/lb 105.0-110.0 108.5-114.0 108.5-113.0 108.5-113.0

70 den textured DEL c/lb 117.0-139.0 118.0-146.0 118.0-146.0 118.0-146.0

150 den POY DEL c/lb 93.0-98.0 96.5-102.0 96.5-101.0 96.5-101.0

150 den textured (weaving) DEL c/lb 103.0-117.0 104.0-126.0 104.0-126.0 104.0-126.0

1000 den low shrink DEL c/lb 112.0-123.0 106.0-117.0 106.0-117.0 106.0-139.0

1.7 dtex DEL €/kg 1.12-1.69 1.20-1.82 1.20-1.78 1.20-1.78

c/kg 124-187 132-201 135-200 137-204

6.7 dtex solid & hollow DEL €/kg 1.00-1.27 1.10-1.40 1.10-1.38 1.10-1.38

not recycled, various finishes c/kg 110-140 120-155 124-155 126-158

4.4 dtex binder 50/50 DEL €/kg 1.26-1.55 1.42-1.70 1.42-1.67 1.42-1.67

standard finish, nonwovens c/kg 139-171 155-188 160-188 163-191

167 dtex POY DEL €/kg 1.27-1.45 1.37-1.58 1.37-1.56 1.37-1.56

c/kg 140-160 149-175 154-175 157-179

167 dtex textured DEL €/kg 1.47-1.70 1.58-1.83 1.58-1.80 1.58-1.80

c/kg 162-188 171-202 178-202 181-206

1100 dtex conventional shrink DEL €/kg 1.52-1.76 1.67-1.93 1.67-1.87 1.67-1.87

c/kg 168-194 185-210 188-210 191-214

Europe

Asia

USA



Spandex Filament Prices


Product Region Terms Unit Jul-16 Q2 2017 Jun-17 Jul-1740 den, warp knit DEL RMB/t 28,000-34,000 36,000-44,000 37,000-41,000 36,000-40,000

40 den, other end-uses DEL RMB/t 27,000-29,000 34,000-39,000 34,000-37,000 33,000-36,000

USA 40 den, warp knit DEL c/lb 400-480 390-488 390-488 390-488

40 den, warp knit DEL €/kg 5.48-8.10 5.55-8.10 5.60-8.10 5.60-8.10

40 den, other end-uses DEL €/kg 5.43-7.65 5.50-7.65 5.55-7.65 5.55-7.65

Average $ per € 1.11 1.12 1.12 1.15

Average RMB per $ 6.68 6.81 6.81 6.78

China

Europe

Exchange rate



Nylon Fibre Prices


Product Region Terms Unit Jul-16 Q2 2017 Jun-17 Jul-1770 den, flat (cheese) CFR c/kg 212-217 244-263 253-257 261-265

CFR c/lb 96-98 111-119 115-117 118-120

70/24 flat (China trade) CFR c/kg 189-194 205-232 226-232 237-242

Local delivered DEL RMB/t 15000 17,500-18,000 18250 19000

840 den, industrial CFR c/kg 215-315 230-315 230-315 233-313

range PA6 to PA66 CFR c/lb 98-143 104-143 104-143 106-142

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

70-200 den, flat (weaving)*** DEL c/lb 235-285 230-295 235-295 235-295

70f68 textured** DEL c/lb 330-370 330-365 330-365 330-365

1200 den, BCF*** DEL c/lb 144-225 159-235 159-235 159-235

840 den, industrial** DEL c/lb 164-175 184-197 184-197 186-202

*PA6 **PA66 ***PA6/66

17 dtex, POY* DEL €/kg 5.00-5.05 5.67-5.75 5.70-5.75 5.70-5.75

c/lb 251-253 276-293 291-293 296-299

17 dtex, textured* DEL €/kg 6.35-6.95 7.00-7.65 7.05-7.65 7.05-7.65

c/lb 318-348 340-390 359-390 366-397

44 dtex, warpknit (beam) DEL €/kg 3.75-3.85 4.38-4.54 4.43-4.54 4.43-4.54

c/lb 188-193 213-231 226-231 230-236

78 dtex, POY* DEL €/kg 3.00-3.10 3.54-3.70 3.59-3.70 3.59-3.70

c/lb 150-155 172-189 183-189 187-192

78 dtex, weaving (on cheese) DEL €/kg 3.60-3.70 4.20-4.37 4.23-4.37 4.23-4.37

c/lb 180-185 204-223 216-223 220-227

78f68 textured* DEL €/kg 4.00-4.50 4.65-5.15 4.69-5.15 4.69-5.15

c/lb 200-226 226-262 239-262 244-268

940 dtex, industrial * DEL €/kg 2.65-3.10 3.35-3.70 3.40-3.70 3.40-3.70

c/lb 133-155 163-189 173-189 177-192

1350 dtex BCF DEL €/kg 2.40-2.72 2.98-3.44 2.98-3.42 2.98-3.42

c/lb 120-136 146-174 152-174 155-178

*PA66

Asia

USA

Europe



Leader: Impact of India's new GST on fibres – no pain, no gain

• India’s long-awaited Goods and Services Tax (GST) was finally rolled out on 1 July; a major reform which includes an array of indirect taxes previously levied by state and central governments on goods and services into a single value-added tax. This should overcome a number of problems that existed in the previous regime and, by so doing, bolster overall economic growth and development in the long run.

• However, this is a disruptive change and the transition to the new

system has already caused a good deal of pain and confusion in the unorganised and informal sector of the economy – a sector that employs the vast majority of the Indian workforce. Nowhere has this been more evident than in the textile industry. Well-founded fears for the future viability of their businesses have prompted strikes amongst textile traders in Surat – the centre of India’s MMF-based textile industry – and elsewhere.

• Other specific concerns of India’s textile industry are connected to the levels and relative rates of GST that have been set for textile products and services. In the lead up to GST implementation, there was a certain expectation that GST rates for cotton and MMF products would be the same in order to achieve so-called “fibre neutrality” and so end a historical policy bias in favour of cotton. This did not happen – cotton fibres and yarns have a much lower GST rate (5%) than MMF (18%). Lower rates of 5% or 12% were available and it has been argued by sections of the MMF-based industry that the relatively high rate of taxation on manmade fibres and yarns, together with the lowering of tariff barriers as a consequence of GST implementation, will open the door to increased competition from yarn and fabric imports.

GST is designed to streamline the way taxes are gathered along the supply chain

Goods & Service Tax launched 1 July 2017 New system runs mainly on-line • GST is a tax on the supply of goods and services that extends all along

the supply chain up to the final consumer. When businesses pay GST on their inputs, they obtain input tax credits (ITC) that can be set off against the GST liabilities they incur when they sell their output. This system ensures that tax is only levied on the actual value added by a business. Under the old regime of multiple taxes, credits of one type could not be set off against liabilities of another. Consequently, tax expenses became embedded in business costs, inflating prices along the supply chain – a phenomenon known as tax cascading.

• The operation of the new tax requires each taxpayer to set up an online account on the GST common portal. Here, taxpayers will record transactions relating to their accrual of ITCs and incurrence of liabilities and pay taxes when they become due. In order to claim an ITC, a taxpayer must have evidence (e.g. a tax invoice) that they have paid the tax. The online system means that the records of the two parties to each transaction are inter-connected and must be synchronised. So, this means that ITCs can only be obtained for documented purchases from GST-compliant suppliers.

• For large firms already operating in the organised/formal sector, these arrangements will prove beneficial once the initial cost and inconvenience of transitioning to the new system are out of the way. However, large numbers of firms in the unorganised sector will find it difficult or impossible to cope with, what for them, is a new burden. Many will not have the wherewithal, in terms of financial capacity or know-how, to operate in the new environment and it seems inevitable that in the short run, many of those now employed in the informal sector will lose their jobs.



Leader: Impact of India's new GST on fibres – no pain, no gain (2)

• So, the arrival of the GST has created an environment which will accelerate the rate at which business activity will move from the small-scale firms to larger firms in the organised sector.

• Whilst an 18% GST rate is applied for MMF, fabric of all kinds is charged at 5% with no refund of unutilised tax credits. This gives a big tax advantage to composite mills that integrate spinning and fabric production, which pay tax of 18% on the manmade fibres that they require – their major purchased input – and then charge tax at 5% for their output of cloth. Because of the large difference in respective rates, it is likely that the ITC accruing from fibre purchases will exceed the tax liability arising from the cloth sales. This means part of the tax paid on acquiring fibres will remain as a cost of production because of the “no refund” stipulation. This inverted tax structure is worse for independent fabric producers because they pay 18% on the price of yarn, a product to which value has been added. Therefore calls have been made to reduce the upstream rates on MMF to 12% to reduce this effect.

• Under the new tax regime, tariff protection is limited to basic customs

duty, which is added to the cost of imported goods before charging the GST rate applicable to the goods in question. The ITC refund mechanism in the GST removed the rationale for the two other import tariffs that were in place; Special Additional Duty (compensation for input taxes embedded in the costs of domestic producers) and Countervailing Duty (compensation for tax on domestic output). A 28% combined tariff barrier for textiles in the old regime has been succeeded by a basic customs duty of 10% in the new one. The impact of this on the quantity of textile imports entering India remains to be seen but many, quite understandably, fear the worst – more imports of textiles

GST will catalyse change and despite initial pain, India‘s textile industry should benefit

Differential tax rates benefit integrated businesses Cotton understandably has a preferential rate • The choice to attach lower GST rates to cotton than to MMF reflects an

understandable decision to prioritise the employment creation capacity of the cotton-based industry over advancing the modernisation of the textile industry and orienting it more towards MMF. Also, the apparent decision not to provide recycled MMF with a lower GST rate than producers of virgin fibre seems to have put the nation’s RPET producers in a very difficult position. It does little to promote the increased use of post-consumer recyclate and may inappropriately promote the use of primary resources to make virgin polymer.

• Under the GST, ITCs can be claimed immediately against the purchase of capital goods and this obviously should facilitate and encourage additional investment in the textile industry and elsewhere. As far as textile exports are concerned, they are zero-rated with refund of accumulated ITCs allowed. Under the old system, only partial credit for the various taxes paid could be claimed and this was often a time-consuming and laborious task. Under the new integrated system, full credit for GST paid will be available.

• In summary, the GST should, in the long run, generate a substantial net benefit to the Indian economy – the textile industry included. It will improve supply side efficiency and will tend to accelerate the modernisation of India’s business sector. However, there will be a considerable amount of collateral damage along the way as a large number of existing businesses operating in the unorganised/informal sector become unviable.



Polyester Chain – Raw Materials

• Reminder – from July onwards we are publishing two Asian purified terephthalic acid (PTA) prices; a domestic China price in RMB and an Asian price in USD. We will stop publishing the China CFR spot (USD/t) price. The history of the two new prices will be available on-line.

• In both May and June there was no Asian paraxylene (PX) settlement, but July saw a relatively speedy settlement at $775/t down from the June average of $792/t. Crude prices initially fell sharply and took PX values down but progressively rose and touched nearly $50/bbl. This has supported stronger PX spot prices which went over $800 in the last week or so. Some Korean PX producers were actively taking cargoes offered by other producers or trading houses, to encourage a PX rally amid strengthening upstream markets. Meanwhile, a major Chinese producer and related trading houses, which have been aggressively selling prompt month's PX cargoes, were absent in the market, apparently content with prevailing PTA margins. Recent spot deals were at $813 and most deals were actually for September not prompt deliveries. Availability seems good but the fluctuations in crude and naphtha appear to be making for a cautious market.

• As for PTA the market has seen prices fall as participants were unnerved by lacklustre downstream transactions and the restart of some large units after maintenance. Some large suppliers have been aggressively sourcing prompt material on an ex-warehouse basis in the local market; and a large one also purchasing imports via its trading arm. Imports look to be strong. Recent spot deals were at RMB5,200-5,220, meanwhile imports were pegged at $650-670/t for PTA from local bonded warehouses, and $645-650/t for NE Asian imports.

Polyester Raw Materials in Asia

PX and PTA MEG and fibre chip • The Asian August contract prices for monoethylene glycol ( MEG) were

set at $980-990/t CFR versus July values at $910-960/t CFR. June and July have been good months for MEG producers in pricing terms and margins, after a poor period from March to May. At the spot price peak of $810-820 mid-June producers maximised their rates particularly as the return from MEG was better than polyethylene (PE). Spot MEG prices have remained firmer than expected into July between $780-810/t CFR. Sinopec finalised its monthly contract price at RMB6,800 up +RMB400 on last month. Spot MEG values into July have stayed strong and moved up to and remained in a band around the $850/t level due to ongoing demand and a positive view from traders.

• July spot price range for Chinese polyester fibre chip widened to RMB6,800-7,200/t, up +RM200 at the low end and up +RM450/t at the upper end. The current prices for solid staple grade recycled flake settled at RMB5,800-5,900/t excl. VAT, up RMB300 and 200/t.

500

1,000

1,500$/t

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Apr-

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-15

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-13

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PTA (Asia) MEG (China) PET Chip (Asia)

Asian polyester raw material spot prices




• In North America the June paraxylene (PX) contract price settled relatively early in the month at 40.75 down -1.25 c/lb from May. This translates into a 42.14 c/lb PTA contract price for June down at 0.84 c/lb from May. The July settlement was 39.75 c/lb and gave a PTA price of 41.68 c/lb with the associated correction for the start of Q3. The slight reductions in PX and PTA were as forecast. A large stock draw in US gasoline stocks by almost 4.5 mmbbls last week lifted both gasoline prices and mixed xylenes blend values. US spot MX ended the week at $2.05/gal but could rise further if gasoline pressure is sustained, which is likely to put pressure on near term US PX values.

• With the July PTA settlement this has taken PTA to a new low in 2017. PCI Wood Mackenzie's PX/PTA outlook is for a pick up in near-term values. There are no reported supply issues for feedstocks other than isophthalic acid which remains tight generally. Sellers have been looking for additional increases in isophthalic prices in recent weeks which reaffirms the general tightness. Overall the downstream markets have been stable in the North American region. There look to be continued delays with the M&G PET plant with little real signs of when it will start. We watch with interest, but have delayed the start in our supply/demand balances. This may impact PET trade and PTA exports which are likely to continue to Europe from Mexico for longer.

Polyester Raw Materials in Americas

PX and PTA MEG and fibre chip • US and Mexican MEG inventories are now at a comfortable level as all

plants are running until the Huntsman outage planned from August to September. The US contract prices tied to Asia have increases going through as the Asia spot price is up from $722/t CFR to $780/t CFR but the contract average is down from $863 to $832 or about a -$70/t decrease. Many contracts use an average of Asia spot and announced CPs and if a 50-50 blend is used then the average net price is down about -$3/t.

• Activity is picking up on new contract negotiations and buyers are not waiting for the new capacity to arrive as they are demanding big discounts to get net prices to reflect exports to China. Everyone in this business fully expects US net domestic large contracts to reflect the export values to China where a majority of the new MEG will be sold.

• Raw materials were settled very late in the month and US chip prices are basically a rollover from June.




• Price settlements for European paraxylene (PX) in May and June were split settlements, with June at €755-765, but July was settled quickly at €715/t the two settlements coming very quickly. There are no supply issues for PX just the disquiet that the recent split settlements brought. It will be interesting to see if we now have a run of agreed numbers.

• As for PTA, the European market has changed little. Local suppliers remain close to or at capacity and it has got worse in the last few weeks as PET producers have been looking for additional product, given a surge in demand due to the weather. The Indorama PTA plant is back on line with capacity entering the market place. When it will be fully running has yet to be confirmed, market reports suggest it has not been easy to bring the plant on-line and it is very late compared with the original planned schedule. When operating we do not expect to see this material in the merchant market. Spot PTA availability is minimal from EU suppliers in the current market and incremental demand will have to be met by Asia if needed and a stronger Euro may assist that. With anti-dumping duty on Korean PTA no longer an issue, we continue to expect Korean product to be available in the market. The June contract price for PTA was €673-719/t and July €646-685.

Polyester Raw Materials in Europe

PX and PTA MEG and fibre chip • The June contract price for MEG in Europe was settled at €859/t, which

is a decrease of -€10 on May. The July MEG WECP has been settled at €853/t. European MEG spot markets are quiet and having lacked direction since late May, have been drifting upwards through July. The MEG demand from the PET sector has been and is still strong. The issue is that coolant and antifreeze producers have stood by and been hesitant to buy MEG to make fighting grade coolant for late Q3 and Q4 sales and supplies to distribution channels. Fibre grade prices had moved up from €745-750 early this month and are now close to €790-795/t FCA. There are no more outages due before mid-September when BASF Antwerp is planned to be off-line.

• In Europe the polyester chip prices settled at €945-1,000/t which is down -€25/t on the final June settlement of €970-1025/t.



Asia Textiles Update

• Akesu, in Xinjiang, North West China, is an example of the Chinese government’s plan to build on the region’s cotton resource advantage and create the countries largest textile production base by 2030. The focus is on sustainable development and cutting edge manufacturing of cotton, viscose and synthetic fibre textiles. It is a challenging ask for a landlocked region where power, water and skilled labour are in short supply.

• There is skepticism about these ambitious plans but success has been achieved in many areas and the ‘One Belt, One Road’ (OBOR) project promises to deliver export opportunities for this landlocked province and quicker and cheaper transport to the rest of China.

• Xinjiang produces around 4 Mt of cotton and Akesu produces 93% of China’s long staple cotton. In Akesu there is a 50 kt reserve cotton warehouse. Warehousing capacity is set to rise to 500 kt in order to make cotton available to spinners in the area all year round.

• Xinjiang is also an important viscose production centre in China. The industry developed initially to take advantage of the availability of cotton linters. The viscose industry in the region is investing in sustainable processing technology, expanding capacity and downstream into spinning. Current viscose staple production is around 750 ktpa with an estimate of 1.15 mtpa by 2020. Investment in spinning includes the installation of airjet (vortex) spinning that is highly suited to spinning viscose.

China’s ‘One Belt, One Road’ policy driving fibre demand higher

Transforming north-west China into a textile hub Global short staple spindle shipments down in 2016 • In 2010 the Xinjiang government approved the establishment of the

Akesu Textile Industrial City project. Developing textile activity in the area would raise employment and incomes. Jobs and skills would be provided not just by the textile industry but also in building the required infrastructure and logistics. Waste water treatment plants are essential in a region where water is scarce.

• Already there are 68 textile and apparel manufacturers in the Industrial City with 2 million spindles, 2,160 weaving machines and 1,000 hosiery knitting machines. The textile industry has created some 15,000 direct jobs while 32,000 indirect jobs have been created.

• Firms investing in Xinjiang are offered incentives in the form of lower cost power, transport subsidies, staff training, insurance and support for financing. Already spinning capacity is at 13.6 million spindles with the goal of 20 million spindles by 2020; a goal that appears set to be reached earlier.

• There are still challenges to achieving this grand plan. These include; • Ongoing Chinese textile and apparel company investment in

Vietnam and other low cost countries. • Increasing interest in automation in textile and apparel

manufacturing both at home and abroad. • Current high manufacturing costs in Xinjiang despite subsidies.

In this case the expectation is that these costs will decline as massive water, power and logistics (OBOR) projects are completed.



Asia Textiles Update Rise in short staple spindle investment in China, Bangladesh and Pakistan in 2016

China’s share of spindle shipments is 46% Spindle shipments to India down 17% • Investment in Xinjiang’s spinning industry is one of the foremost

reasons for the recovery in China’s short staple spindle shipments in 2016, the first increase since 2011. This according to the ITMF (International Textile Manufacturers Federation) publication, International Textile Machinery Shipment Statistics, Vol. 39.

• Global shipments of short staple spindles fell 12.8% in 2016 to 7.9 million. This is the third consecutive annual decline and the lowest level since the 7.2 million spindles shipped in 2009. These lower global spindle shipments in 2016 are partly cyclical but also reflect improvements in productivity and changing dynamics in the fibre industry:

• Filament, polyester in particular, growing more rapidly than cotton and polyester staple fibres and taking share in many traditional staple spun yarn applications.

• Rapid growth of staple in nonwoven and fiberfill applications.

• In 2016 China remained the largest destination for short staple spindles with a 46% share; up on the low of 36% in 2015 but far below the 70% of 2009. Rebalancing in the Chinese cotton market since 2010/11 and fast growth of MMF staple production for nonwoven and fiberfill applications are key factors behind these changes

• India’s share investment in spinning slowed in 2016 as did Vietnam’s. Bangladesh continues to invest taking a 10% share of shipments in 2016, double that of Pakistan.

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20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2009 2012 2011 2013 2014 2015 2016

Turkey Vietnam Pakistan

Other Bangladesh India

China

ITMF short staple spindle shipments* (% share)

2009 2010 2011 2012 2013 2014 2015 2016Total (million spindles) 7.2 12.5 14.3 10.5 11.6 9.8 9.0 7.9

Source: ITMF ITMSS (International Textile Machinery Shipment Statistics) *Changes in the survey questionnaire and survey membership may mean data is not strictly comparable year on year.



Asia Textiles Update China notifies the WTO of its intention to ban imports of 24 kinds of waste by the end of 2017

Attempt to reduce environmental impact of waste Notification affecting recycled flake prices • China originally imported metal smelting, paper, plastic and textile

waste in order to ease the tight supply of raw materials in the country’s rapid rise to become the ‘factory of the world’. China has since developed its own recycling facilities in many industries as well as implementing policies to reduce pollution and water use. Despite these advances some industries in China still depend on imports of waste for a large share of their raw material.

• China produces around 5 Mt of recycled polyester fibre. Around 50% of the raw material is imported while the rest is sourced domestically. In 2016 China imported around 2.7 Mt of waste & scrap of Polyethylene Glycol Terephthalate under one of the targeted HS codes, 39159010. This included bottle bricks and unwashed flake. At this time we believe washed flake is not included. However official confirmation of specific products to be included in the ban is still pending. Since the announcement last week recycled flake prices are up, continuing to rise despite virgin chip prices retreating by RMB50/t.

• The proposed ban on imports of waste paper could well have an impact on the already tight supply of dissolving wood pulp (DWP) which would push up viscose staple fibre prices.

• Imports of cotton, wool and fine animal hair waste as well as imports of these and MMF yarn waste and garnetted stock would have some impact on the price of open end yarns, some woollen yarns and non-spun applications.

• On 18 July China notified the World Trade Organization (WTO) of its intention to ban 24 types of solid waste products by the end of 2017. The notification is under the WTO Committee on Technical Barriers to Trade, reference G/TBT/N/CHN/1211. In the notice in circulation the last date for comments is given as 20 July and the proposed date for entry into force as September 2017.

• The rationale behind the notification is that large amounts of dirty and hazardous waste is mixed in the solid waste. This has led to serious pollution of the Chinese environment and people’s health.

• This notification should not come as a surprise. Over the last three years the Chinese government has announced policies and carried out a number of measures to reduce pollution and improve environmental standards. Earlier this year the government had signalled it be looking again at imports of waste.

• The list of products in the notification includes certain types of waste from the manufacture of iron and steel.

• Those items in the list that have a direct or indirect impact on the fibre industry include imports of:

• unsorted waste paper and scrap under HS 470790, • certain waste, parings and scrap of plastics under HS 3915, • certain waste including yarn waste and garnetted stock of wool

and fine animal hair, cotton and MMF under HS 5103, 5104, 5202 and 5505 and

• used or new or worn out rags, scrap twine, cordage, rope of textile materials under HS 6310.



Polyester Filament China – PTF

• Higher MEG prices in mid-June sent PTF prices higher. PTF prices continued to climb through to mid-July despite softer MEG prices. Maintenance at a number of PTA plants in June and July caused tighter supplies and a turn up in prices which led to better demand for filament as the downstream attempted to defend against further price increases.

• PTF sales softened from mid-July as weavers and knitters prepared to reduce operating rates during the hottest months in order to save energy (for cooling). However PTF prices should hold up since filament stocks are not high and raw material prices remain volatile.

• POY 150f48(96) went up RMB500-600/t on last month. The rise took place earlier in this period when sales were better. In the past two weeks sales were flatter and POY prices increases were smaller. Texturizers bought POY through late June in order to prepare stock so POY sales into texturizing were flat in the second week of July. POY stocks are around 11 days, down two days on last month. POY 75f72(144), 120f192 and 150f288 sold well through last month.

• Some low end household fabrics using DTY are being replaced by FDY on cost, hitting texturizers. However DTY prices generally went up since downstream players wanted to build up stock. DTY stocks fell two days on last month to 20 days.

• Prices for the most common product, 75f72, intermingled, went up RMB500-700/t. Demand for DTY 100f144 and black yarn is normal. Probably the best selling product at the moment is DTY 75f144 for warp knitting and jet weaving for fine fabric, peach effect.

The market is buoyant, but it is difficult to say how long it will last POY & DTY FDY

• Activity in FDY remains high. Price increases in the last month were larger than for POY and FDY. Supply is tight for two reasons:

• Higher demand into lower cost household fabrics as replacement for DTY.

• Maintenance in June and July at several large companies including Hengli, Yinan and Huaya as well as in some smaller companies.

• FDY stock levels also fell two days to the current 8-9 days.

• FDY 50f36, bright, for sateen fabrics, and FDY 40f72 are selling well. Demand for full dull product is improving.

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Jul-17 Jan-17 Jul-16 Jan-16 Jul-15 Jan-15

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75/36 POY 75/36 FDY 75/36 DTY non IMG

China domestic PTF prices




• Price increases vary depending on demand for the individual products: • Highest for FDY where supply is tight, demand is good and

stocks at 8-9 days. • POY follows with stocks at 11 days. • Generally increases in DTY are lower since some products

face softer demand and stocks are 20 days.

Prices are higher for both domestic and export markets

Domestic prices Export prices • Export prices went up as well but more moderately than domestic

prices. Importing companies in other countries appear less willing to follow prices up and China is facing stiff competition from S Korea, Taiwan and Indonesia in FDY and from India in POY.

• POY 150f48 prices are up 4-5 c/kg on last month. DTY 150f48 prices are up 4 c/kg on last month.

Type Denier75f36 8850 - 8850 10400 - 10400 1550 1550

150f96 8500 - 8600 9000 - 9150 500 550200f96 8400 - 8500 8950 - 9050 550 55075f36 8800 - 8900 9400 - 9500 600 600

100f36 8100 - 8300 8700 - 8900 600 600150f96+48 7700 - 7800 8200 - 8400 500 600

75f36 10900 - 11500 11300 - 11900 400 400100f36 10700 - 11000 10500 - 11200 -200 200150f48 9300 - 9500 9700 - 9900 400 40075f36 11000 - 11600 11700 - 12300 700 70075f72 11500 - 11800 12000 - 12500 500 700

100f36 10800 - 11400 11100 - 11700 300 300100f144 10600 - 11200 11000 - 11700 400 500150f48 9900 - 10200 10300 - 10700 400 500

150f288 10000 - 10600 10300 - 10900 300 300

DTY (IMG)

June July Change

FDY

POY (for DTY)

DTY (non IMG)

Selected polyester textile filament prices in China (RMB/t) Polyester textile filament prices in China & Asia

Denier Type Terms June July ChangeDomestic RMB 8800 9400 600c/kg CFR equivalent 110 118 8c/kg FOB China 109 116 7c/kg CFR Asian port 114 121 7Domestic RMB 10900 11300 400c/kg CFR equivalent 137 142 6c/kg FOB China 136 142 6c/kg CFR Asian port 130 136 6Domestic RMB 7700 8200 500c/kg CFR equivalent 97 103 7c/kg FOB China 100 105 5c/kg CFR Asian port 103 108 5Domestic RMB 9300 9700 400c/kg CFR equivalent 117 122 5c/kg FOB China 124 125 1c/kg CFR Asian port 126 127 1

150

POY

DTY

75

POY

DTY




• Chinese exports of PTF for the six months to May totaled 842 kt up +2% on January to June 2016. This is the result of year-on-year increases in May and June of +9% and +26% respectively. Major destinations were Turkey (+17%) and Egypt (+29%) followed by Vietnam (-16%) and Pakistan (-19%).

• Cumulative to June exports of DTY and FDY were flat at 437 kt and 191 kt respectively. In contrast exports of POY were up +9% to 215 kt.

Export demand for Chinese PTF improves in May while domestic demand is strong in July

Chinese PTF exports to Egypt up 51% in May Fabric market – a business performance indicator • China Light Industrial & Textile Fabric Market is a useful indicator for

the business performance of textiles and apparel. The chart below shows average daily transactions in any given months and points to seasonal patterns that reflect supply chain activity and holidays.

• Average daily transactions in 2017 to 17 July were up 9% on 2016. For filament fabrics, with a 72% share of transactions so far this year, the increase was 13%. This is indicative of the strength of domestic demand for fibres in 2017, particularly for filament.

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1,0001,2001,4001,600

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2017 2016 2015 2014

China PTF exports (cumulative)

Source: GTT

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Average daily fabric transactions (all fibres) at the China Light Industrial & Textile Fabric Market (Keqiao)

Source: China Light Industrial & Textile Fabric Market (Keqiao)



Polyester Filament Asia – PTF

• Polymer, semi dull, China east market (Jiangsu and Zhejiang) spot prices went up 10.5% in the past four weeks, settling at RMB7300-7400/t. Polymer reflected the change in feedstock prices quickly. Margins at chip-fed lines are under pressure. These operate mainly for specialties such as dope dyed but even so utilization rates are currently low, around 40%.

• Recycled POY prices went up by RMB400-450/t in the last four weeks, influenced mainly by strong gains in in virgin filament. Margins in this sector improved in the last month since recycled filament prices are running ahead of flake price increases.

• Prices for Korean PTF yarns recovered +10 c/kg in July after falling -20 c/kg in June, with prices for semi-dull 75f36 FDY at $1.30-1.35/kg FOB and trilobal bright 150 denier FDY moving to $1.40-1.45/kg FOB.

Good gains in virgin PTF prices during July extend to recycled filament

Virgin polymer, recycled flake and recycled POY Japan polyester filament production flat in H1 2017

Product May June Julyfilament grade recycled flakes (excl. VAT) 5900-6000 6050-6150 6300-6400filament grade recycled flakes (incl. VAT) 6400-6500 6550-6670 6900-6950150D POY 7000-7100 7300-7350 7700-7800

Polymer semi dull prices in China (RMB/t)

• Production of polyester filament in Japan fell -3% in 2016 according to data by the Japan Chemical Fiber Association. This marked the 6th consecutive year of decline since the +16% recovery of 2010.

• So far PTF has been hardest hit by the decline in production with PIF and FSB just about holding on to volumes. In the first five months of 2017 JCFA data suggests production was staple, up just +0.4% on the first 5 months of 2016.

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200kt kt

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4Q-running total (RHS) quarterly production (LHS)

Japan – polyester filament production

Source: JCFA Q2e 2017 estimate is based on April and May actual data and an estimate for June

Recycled flakes and POY prices in China (RMB/t)

Product May June JulyPolymer semi dull spot 6450-6550 6600-6700 7300-7400Sinopec semi dull, ordinary denier 6800 6925 7600Sinopec semi dull, fine denier 6950 7075 7700Hengli semi dull 6800 6980 7600



Polyester Filament Asia – PIF

• China Automobile Industry Association data for June 2017 shows auto production and sales at 2.167 and 2.172 million units respectively, up +5.4% and +4.5% year-on-year.

• Motorcycle production and sales in June were 1.576 and 1.574 million units respectively, up +12.6% and +14.8% year-on-year.

• Further details are set out in the Asia Nylon Industrial Filament section of this report.

• The polyester industrial filament (PIF) market showed an improvement during July since the downstream wanted to restock in order to avoid the possibility of having to pay higher prices if raw materials went up further.

• Firm feedstocks resulted in higher production costs so manufacturers adjusted prices for both conventional and low shrink high tenacity types by RMB700-800/t.

• HMLS prices moved up by only RMB200/t since manufacturers were able to absorb the additional production costs for this high value-added product. However since stocks are at a low level at the moment there is a possibility that prices will be adjusted up by another RMB100-200/t.

• Export prices for conventional type increased by +5 c/kg, while prices for low shrink type remained unchanged.

Demand for PIF improves in China following good auto sales and downstream restocking

June vehicle sales up but growth slower than in 2016

Polyester industrial filament (PIF) prices

PIF Prices in China domestic (RMB/t) and export ($/kg) markets

Type DenierConventional 1000D/192F 11600 - 12000 11300 - 11600 12000 - 12400HT low shrink 1000D/192F 12500 - 12600 11400 - 11700 12200 - 12400

HMLS 1000D/240F 13200 - 13700 12800 - 13300 13000 - 13500Conventional 1000D/192F 1.45 - 1.50 1.40 - 1.45 1.45 - 1.50HT low shrink 1000D/192F 1.55 - 1.60 1.45 - 1.50 1.45 - 1.50

May June July

Contract settled prices for PIF and HMLS polymer in China (RMB/t)

Product May June JulySinopec bright industrial grade 6950 6950 7725HMLS application 6980 6980 7755Hengli bright industrial grade 6900 7180 7725HMLS application 6980 7230 7805



Polyester Filament Americas – PTF

• The 4 July holiday closures for downstream customers were generally 5 to 10 days so shipments were slow at the end of June and early July, but in the second week of July volumes are satisfactory. No-one is claiming a resurgence in business, but there is relief that sales have picked up to early June levels. We hear claims of more interest in new programs in the second half of the year, but we have had these promised a number of times in recent years, only to be disappointed by actual volumes. CAFTA continues to be a good source of yarn and fabric export for US manufacturers, but it fails to deliver the anticipated growth. Apparel imports are up 5% in 2017

Business gradually moves back to normal after holidays

Polyester textile filament (PTF) PTF • Automotive volumes are slightly slower than 2016. The following chart

demonstrates the growth in US truck and SUV sales at the expense of conventional car sales and we correlate this with gasoline prices. The rise of truck and SUV sales parallels the decline in gasoline prices reflecting the reduced concern of fuel efficiency to the buyers of light commercial vehicles. The gasoline price shown is a wholesale price for June of each year. The larger the vehicle the better for most of the polyester applications, from upholstery fabric to tyres etc.

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China Indonesia CAFTA/DR/Haiti Vietnam Bangladesh Other 3.5

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Gasoline RHS Truck/SUV Car

US sales of light vehicles to June

Source: Wards Auto and US Energy Information Administration Gasoline is New York Harbor Conventional Gas Regular Spot FOB

US imports of mainly man made apparel



• In general the downstream textile industry in the region is a little more optimistic about the second half of 2017. In response to rising fibre prices most companies have decided to purchase either domestic or imported raw materials in preparation for the busy season to supply year end products.

• However concerns remain about the strength of regional demand for textiles and apparel. In Brazil political uncertainty continues to affect consumer demand especially now that former Brazilian president, Luiz Ignacio Lula da Silva has been found guilty of bribery and money laundering and sentenced to nine and a half years in prison.

• The market is particularly weak in Argentina where imports of clothing are up +60% in the first half of 2017 compared with the same period in 2016 while textile imports show a -6% reduction. This points to a complete change in sourcing patterns for the whole industry. VF Corporation, which owns brands such as Lee, Wrangler and Timberland, has decided to close its plant in La Rioja, Argentina.

• Mafissa, the PSF and PTF producer in Argentina, has suspended 240 employees following a large fall in sales.

• In Brazil the tariff reduction to 2% for imports of polyester POY up to 30,000t has been extended until May 2018. This will mainly domestic texturizers including Petroquimica Suape / Citepe and Unifi.


• POY and DTY from the domestic producers has generally rolled over this month with the lower volumes due to holidays and not much happening in raw material pricing. Unifi a leading producer of POY and DTY will be announcing their 12 month results later this month and it is expected that recent strong performances will be continued although there has been some additional raw material pressure during the full year while they have tried to keep yarn prices stable for most of the year.

• Import prices are starting to move up from China where new offers are generally up 3–5 c/kg for POY and DTY and much more for FDY where increases of up to 12 c/kg are being demanded.

• Import volumes are flat with last year up to five months, a slight increase in FDY offset by reductions in POY and DTY giving total imports of TF down by just 1.6% after five months.

Domestic pricing remains stable while imports are increasing

Large rise in imported FDY quotes Latin America domestic producers still under pressure

Latin America PTF prices

Origin May-17 Jun-17 Jul-17China 1.22-1.28 1.35-1.40 1.50-1.55India 1.42-1.46 1.44-1.48 1.47-1.50China 1.58-1.62 1.60-1.65 1.65-1.70India 1.32-1.36 1.33-1.37 1.36-1.40China 1.34-1.38 1.36-1.40 1.42-1.47

FDY 75 den brightDTY 75 den circular knittingDTY 75 den circular knittingDTY 150 den circular knittingDTY 150 den circular knitting




• An issue that always impacts import prices is the cost of shipping a 40 ft container to the US and we have had a volatile last 12 months starting with the Hanjin bankruptcy in September 2016. Prices rapidly increased from less than $2,000 from Asia to the US east Coast, to levels as high as $3,400 were reported. In recent months prices have receded and we now hear of $2,200 – 2,400 for contract pricing.

• In a further move to consolidation in the industry, China’s state owned COSCO shipping line has agreed to purchase Hong Kong based Orient Overseas International Ltd (OOIL) for $6.3 billion. If the deal is completed this will make COSCO the third largest container line in the world with 12.6% of the world’s container capacity.

• During the last two months freight rates have increased from China to the west coast of South America by around $800 per 40’ dry container. This is a +3-4 c/kg rise in the price of polyester filament yarns, whether DTY or FDY.

• Chinese producers exporting to the region are losing competitiveness not only because of larger increases in FOB prices but also as a result of higher freight rates.

• In the case of DTY from Indian producers, the impact of freight has been lower and allowed them to gain share market in regional markets.

• Chinese FDY products which have experienced the largest price increases across the different polyester fibre types are losing ground against traditional competitors from Korea, Taiwan and Indonesia.

Higher shipping costs adding to price increases

Shipping industry consolidation Freight costs up in the last two months

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Monthly average freight cost (USD) for a 40’ foot container From China to west coast South America



Polyester Filament Americas – PIF

• As mentioned last month we had been expecting some development in the future ownership of DuraFiber Technologies. They are the lone US producer of (PIF). The business, with its three plants in the USA, one plant in Mexico and two plants in Europe, has been owned by the private equity company Sun Capital Partners since 2003 – a long time for private equity ownership. It is reported that Sun Capital has approximately $9 billion of capital under management. Following a lengthy search for a buyer of the business a target was set for a conclusion by the end of June 2017. Over the last six months a number of both strategic and investment companies have looked at the purchase but no-one has come forward with an offer that meets Sun Capital targets. On 13 July DuraFiber announced that they were going to close their three US plants (Salisbury NC and Shelby NC PIF plants and Winnsboro SC tyre conversion plant). The company release advises closure will be in 60 days if a buyer is not found during that time. The overseas plants are not involved at the present time but it is widely anticipated that there will be changes there also. On 13 July DuraFiber also wrote to their customers advising of the plans for closure if no buyer can be found. They advised customers that if they wanted to order additional product for supply in the next 60 days they would have to place their orders in the next two weeks with a price premium of 25% over existing prices and payment in advance. The letter cites the very competitive nature of the industry and the price pressure that has been forced on DuraFiber. Clearly the rapid growth in imports from China has set price standards that have made it impossible for them to continue.

DuraFibre to close if buyer not found within 60 days

Polyester Industrial Filament (PIF) DuraFibre and the Berry Amendment • There will be a number of buyers of PIF and tyre fabric who will be

placed in a difficult situation if the closure goes ahead, but it has been clear for a number of years that the continued price pressure to compete with imports was placing a great strain on the company. Changes of management and closure of plants have all been warnings to the industry, so this disappointing news should not come as a shock to anyone. It is difficult for companies to continue if their pricing is so severely eroded.

• Part of DuraFiber’s business is in supplying for products for purchase by the US military. These have been protected under the Berry Amendment which forces the military to buy goods made in the US of US origin material. If DuraFiber does close in 60 days there will be a scramble for overseas PIF suppliers to receive a waiver to allow them to supply. There is also concern that this need for a waiver will encourage the Dept. of Defense to apply for the overturn of the Berry Amendment in its entirety which would open up the possibility of finished goods being purchased from overseas.

• For those companies supplying into markets where qualification testing is necessary there are going to be issues in setting up supply chains. For non Berry products it is assumed that many will already have qualification established for dual sources of supply, but it will not be easy to arrange sufficient supplies in a 60 day period when dealing with supply chains from Asia where shipping alone is likely to take 35–45 days. Asian suppliers will be pleased to receive additional volume, but can be anticipated to be less flexible in pricing.



Polyester Filament Americas – PIF

• The chart shows the increase in volume of US imports of PIF from the top four countries and the comparison of FOB declared prices per kg of China against the average of the next three countries. The steady decline in prices reflects raw material declines, but the constant differential between China and the average of the next three is very obvious as is the resultant growth in Chinese volumes against the other top three. In 2012 China had 63% share and in 2016 had 72% share. The other top three had 25.5% share in 2016.

Changes in the US PIF Industry

PIF PIF • The previous announcement from DuraFiber makes it difficult to judge

domestic pricing as a number of their contracts are based on a formula to raw materials and we do not think the existing company can change these contracts on the basis of them planning to close. We are therefore continuing with our pricing of HMLS based on the formula which shows no change over Q2 pricing. In Industrial filament we will keep the low end of the price based on “normal” market conditions, but the higher end of the range will reflect the 25% premium that has been announced.

• Market information indicates that Indorama will be purchasing the DuraFiber Technologies plant in Queretaro Mexico where they have polyester and nylon industrial filament capacity as well as tire fabric conversion capacity. It is still to be determined whether there will be any negotiations between the two parties for the purchase of any further overseas facilities of DuraFiber. There is no press release at this time

• Import prices are moving up by 3–5 c/kg for regular shrink products, but there is little movement in low shrink resulting in the delta between products slipping to 3–5c.kg compared to a typical level of 10 c/kg. Low shrink 1000 denier is offered at $1.53/kg FOB and regular shrink is at $1.50/kg. Imports of HMLS from Asia are also on quarterly formula pricing and depending on the detail of the formula we are hearing of reductions for Q3 of 2–5 c/kg.

• Details of Argentina’s and Brazil’s motor vehicle markets are in the Americas nylon industrial filament section of this report.

Source: OTEXA

Comparison of US imports of PIF

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Latin America PIF prices

Origin May-17 Jun-17 Jul-17China 1.35-1.40 1.33-1.40 1.43-1.50China 1.44-1.49 1.41-1.47 1.48-1.55

HT 1000 den regular shrinkageHT 1000 den low shrinkage



Polyester Filament Europe – PTF

• Indications in June that the summer slowdown may have arrived early were not supported by better sales seen in July than 2016. As usual sales into automotive interiors were good, and even home textile sales were better than expected.

• In July our PTF reference prices remain flat in Europe. Prices had risen in Q1 2017 on the back of raw material prices and sufficient demand, then fell back during Q2 2017, as raw materials softened. Now we see a low point ahead of price increases coming later in Q3 as raw materials have started to strengthen again and Asia export prices are rising. The summer lull and the long delivery lead time for the imports both delay the pass through of cost increases.

• Polyester textile filament (PTF) is not only used in apparel end uses but also in car upholstery. The Italian coloured polyester yarn producer Sinterama has introduced Madreperla, which is a range of luminescent, glossy and iridescent yarns that could be used in automotive interiors. This confirms that car interiors can be seen as 'fashion' items as well as being simply functional. This development may go further as cars move towards automation and the interior needs are decided by all the passengers; moving away from being driven by and pandering to a driver.

• Back in May Sinterama sold its remaining share in Trevira to Indorama Ventures Ltd. This seems to be aligned with the new ownership structure at Sinterama (see our May report) and allows for clearer focus on developments like Madreperla.

PTF demand holds up as the summer season begins

PTF prices in Europe on hold before rising

Textiles investments in Russia P • Faberlic, Russia has announced investment in apparel production in

the Russian region of Ivanovo, a region with history in the textile industry, originally based on flax, and in the 19th century known as “The Manchester of Russia”. Faberlic’s main business is cosmetics, and textiles is about 20% of the total revenue (some $400 million in 2016). They plan to invest up to $20 million in total, and have already started the first product line for textiles in May 2017. Vladislav Davankov, VP at Faberlic, explained that with the current USD exchange rate, seamstress wages there are comparable with China, which was among the reasons for the opening of production in Russia. They will start with knitwear at a rented factory and move to pantyhose and other garments in their yet-to-be-built own factories over the coming few years.

• Investment in the Ivanovo polyester complex, approved in late 2016 by the Vnesheconombank, will lead to new capacity for the production of polyester, its main consumers being textile enterprises. Construction of the complex in Ivanovo is set to begin in 2017 and should reach design capacity by 2020. Reports say that a Czech company Unistav was selected last week as primary contractor for construction works. The capacity numbers are unchanged (175 ktpa of PES Fibre and 30 ktpa of PET granulate). The goal is to substitute imports of polyester and cotton, so if the apparel project above is implemented, Faberlic will be able to buy a polyester cloth locally to make up its finished products.

• As can be seen in the graph on the next side, the consumption of PTF in Russia is increasing and Q1 2017 volume is +31% over Q1 2016, and for the full year 2016 the consumtpion was +22% over 2015. Nevertheless PSF by dominates the demand for polyester fibres.



Polyester Filament Europe – PIF

• Pricing industrial polyester is easier than nylon, as agreements track PTA and MEG which are more transparent than polyamide raw materials. July prices roll over, or at most see a drop of a couple of euro c/kg. We have kept our reference prices flat for July. The market is balanced and shares seem to be stable, awaiting firmer prices ahead.

• There are some concerns that the strength in the automotive market may not continue indefinitely, and that any slow down may result in a sharp drop in demand.

• Maybe the current stability will change if the resolution of the future for DuraFiber in Longlavlille and Bad Hersfeld becomes clearer. It appeared that several global players were still in the running for the European and Mexican assets (not effected by the recent US announcement). The French and German Dura operations address different industrial market segments (with some non-tyre overlap) and therefore they may not attract the same buyer. The impact of a transition in the US will have a ripple effect around the world, as Dura still supplies some of the Big 6 tyre producers, even if at a lower exposure than was historically the case. Also, the potential consolidation may not be in the interests of the tyre producers who tend to enjoy plenty of competition between their suppliers.

• Data for Russian mill consumption of various fibre types has become available; see opposite. Consumption was up +14% in 2016 and is up +11% by the end of Q1 2017. Filament volumes are small compared with staple, but PIF growth accelerated to +50% in Q1 2017.

The outcome for DuraFiber keeps the markets guessing

PIF Europe Polyester total fibres consumption in Russia

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kt +14%

+11%

Production

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consumption Net imports

Consumption of polyester fibres in Russia

Production and trade of chemical fibres in Russia

Source: Market

Source: Market



Polyester Staple: Asia

• Polyester staple fibre (PSF) prices went up gradually towards the end of June driven by generally firm feedstock prices. The rise in PSF prices then was slower than for filament.

• In early July the pace of PSF price increases accelerated. In the second week of July prices went up RMB50-100/t every day. But then prices stopped rising as demand eased. By then the downstream had either already prepared the required stock or were very close to their desired level.

• The operating rate climbed 5-6% points in the last month to the current 83-84% for CP units.

• Current prices for 1.4 denier semi dull in Shandong and Hebei, north China settled at RMB8,100-8,300/t, up RMB600-650/t on last month, which is a very large increase in just 3-4 weeks. In Jiangsu and Zhejiang, east China, 1.4 denier staple settled at RMB8,050-8,200/t, up R600/t on last month. The same specification in Fujian settled at RMB8,200-8,300/t, up RMB700/t on last month.

• Export prices for 1.4 denier, 38mm staple, are $1.03-1.07/kg FOB China, up +5-6 c/kg on last month.

• Demand for hollow staple continued improving largely due to seasonal reasons (preparation for winter apparel) and prices moved up RMB250-400/t on average which is a good sign of market recovery.

Across the board increases in China’s polyester staple fibre (PSF) prices

PSF prices up across most types

Slow increase in recycled PSF and flake prices

• 1.4/1.5 denier recycled staple prices are up RMB300/t on last month. The increase is mainly a cost push from the prices for recycled flakes, imitation virgin staple grade, hot water washed, which are up RMB200-300/t up on last month.

• The potential ban on imports of solid waste is causing some concern in the industry since the trade code for bottle bricks and flake (unwashed) is mentioned in the notification to the WTO.

Major prices for key staple products in China

TypeFibre chip 6600 - 6700 7300 - 7400

6 den hollow 3-D 9450 - 9900 9800 - 103001.4/1.5 den 38mm 7500 - 7650 8100 - 8300

Flake 5500 - 5700 5800 - 59006 den hollow 3-D 7550 - 7900 7800 - 8200

1.4/1.5 den 38mm 6700 - 6900 7000 - 72001.4D 98 - 101 103 - 107

6D (fiberfill) 118 - 123 121 - 126

Virgin material

Recycled

Virgin material(export $/kg)

June July

Sinopec contract settled prices for PSF (RMB/t)

Product May June July1.4 den staple semi dull 7825 7925 83751.2 den staple bright 8475 8600 9225



Polyester Staple: Asia

• The drivers of recycled PSF prices are the price of bottle bricks, conversion costs and movements in virgin staple prices.

• In general when recycled and virgin PSF prices are close together, such as in Q1 2015, demand for recycled PSF (and therefore recycled flake) tends to ease. The exception is where brands have target volumes and programs in line with their social responsibility strategy.

The big price increase of virgin staple gives a better chance for recycled staple

Delta between virgin chip and recycled flake up in July Comparison of flakes vs. virgin chip • The delta between China domestic prices for recycled flake and virgin

chip rose in July after dropping to a low of just over RMB1,000/t in June.

• It is doubtful whether the delta will open up further in August. The potential ban on imports of solid waste announced last week is likely to lead to tighter domestic supplies of recycled flake at least until clear, unambiguous information is available to the market.

• Korean polyester staple fibre export prices strengthened along with

other prices in Asia, and 1.5 denier spinning fibre price is now at $1.07-1.10/kg FOB (+2 c/kg). Prices for low melt binder fibre remained at $1.30-1.35/kg FOB in July, as reports of continued shortages of IPA are outweighed by excess supply. Nevertheless, it seems the recent softer pricing seen in Q2 is not liked by suppliers and there are reports as we write indicating some recovery in low melt prices for the rest of Q3.

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Delta Recycled Flake Chip

China domestic virgin chip and recycled flake prices



Polyester Staple: Americas

• Markets have restarted after the holidays at the same level as in mid June. There does not seem to be much enthusiasm that demand is going to improve. However the supply structure may be in for a change considering the anti dumping claims filed against fine denier staple (less than 3 denier) and also against low melt staple.

• Details of the fine denier case were reported in June FR and action has now moved further forward. The International Trade Commission (ITC) has unanimously agreed in their preliminary determination that unfairly traded imports have injured domestic producers, but they have excluded Vietnam from the case. We have been surprised by the relatively high level (13,000 tons) of imports from Vietnam in the fine denier category. We believe that much of the imported volume from Vietnam is heavier denier and recycled. The ITC in removing Vietnam have not given a reason, but they may have found some miscoding.

• The ITC finding that injury has occurred now means that they will take the case forward, and it is expected that a preliminary penalty rate for both anti dumping and countervailing duty will be determined some time in October/November. At this time importers will have to post a bond to bring any product into the USA from China, Taiwan, Korea and India. The ITC will then do a detailed study of individual companies from the various countries and will determine a final penalty rate by country and by company. We would expect this to be in Q1 or Q2 2018. The possibility of any penalties being applied retroactively means that most importers will have to look for alternative sources, and the search is on. In South Asia both Indonesia and Thailand have substantial staple capacity, but the largest producer in both countries is Indorama, whose US operation was part of the antidumping claim.

A quiet market with a lot of Trade Action!

Fine denier anti dumping Low melt anti dumping • Following the fine denier anti dumping claim, there has now been a

further claim against imports of low melt polyester staple from Korea and Taiwan. The claim is filed by Nan Ya who is the only domestic producer of commodity low melt staple.

• Imports have grown rapidly and the chart shows a remarkable concentration of supply from Korea and Taiwan. In 2016 these two countries were more than 98% of total polyester low melt imports. The dumping claim is 32.95% - 45.84% against Korean producers and 30.24% - 62.52% against Taiwanese producers.

40

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kt

2011 2015 2013 2012 2014

Taiwan Korea Others Source: OTEXA

US imports of polyester low melt staple



Polyester Staple: Americas

• The applications for low melt polyester staple are into the filling industry and also into nonwovens where a number of end uses have seen good growth. Automotive insulation has been a significant growth area with fabric mouldings being used under the body, in wheel arches and as insulation blocks around engines. Some of these applications can have as much as 40% low melt content. There is also an increasing demand for black low melt fibres.

• Nan Ya as the only domestic producer has approximately 50,000 tons capacity for low melt. Due to the low prices it is believed that they have been running at a relatively low utilisation rate. So they could increase production and it would probably be relatively easy to increase capacity by converting further conjugate capacity.

• Market resistance to the anti-dumping action mainly concentrates on the shortfall in available capacity to meet demand and also lack of black product. Users are also concerned that if the claim was successful and Nan Ya increased capacity they would only have one supplier. On the other hand, it is likely that Chinese producers will take the opportunity to convert capacity from conjugate to low melt to fill the shortage. The first hearing will take place third week in July.

• One thing that is clear is that Low Melt has been consistently sold at prices that are lower than would appear to be reasonable.

Imported polyester staple (PSF) prices up but domestic prices flat to down

Low melt anti dumping

PSF pricing • Domestic pricing based on a raw material formula with a month lag is

showing a reduction of 1.8 c/lb for July, whereas market prices for fine denier are tending to be flat. Low melt prices are down a further 2 c/lb.

• Imports are being quoted from China with an increase of 3–5 c/kg in July for fine denier, but with the possibility of retroactive anti dumping duties very few end users or distributors are prepared to risk ordering now. Recycled fibrefill is up 2–3 c/kg with good quality in the $1.00–1.03 range for hollow siliconised. Lower quality clear is at 95 c/kg and green at 87c.

• One of the outcomes of the fine denier anti dumping claim is that it has provided a boost to the project to restart the ex Wellman staple plant in Darlington SC. We have reported on this previously but progress has been slower than expected, however the project is still active and the likely added protection of anti dumping is providing more confidence and may result in a more rapid conclusion.

• There are market reports that one of the major integrated players from yarn spinning to apparel production is likely to make a further yarn spinning acquisition, but there is no release yet.

• In South America regional producers are enjoying better margins and volumes. They are becoming a more attractive option opposite price increases from Asia, particularly China.

• However many staple yarn spinners in the region are facing a weak market. They are unable to compete with spun yarns from Asia at current regional PSF prices.

Latin America PSF prices Origin May-17 Jun-17 Jul-17

Far East 1.02-1.06 1.01-1.05 1.08-1.12Far East 0.96-1.04 0.96-1.04 1.02-1.10Far East 0.88-0.95 0.88-0.95 0.94-0.99

PSF 6 den HC for NW/fillingsPSF 6 den solid for

PSF 1.2 den for spinning



Polyester Staple: Europe

• July sees demand for polyester staple fibre (PSF) in Europe softening a little, but only seasonally as some lines move into scheduled maintenance. Underlying demand is good, especially into nonwovens where there is little seasonality from the consumer markets served. Whilst PSF demand into spinning in Europe is fairly low compared with demand into nonwovens, this demand has benefitted in recent months from tight viscose staple fibre (VSF) supply. Now VSF supply is said to be better and though VSF prices rise in Asia they are giving a little ground in Europe and reducing the benefit of moving to PSF.

• Commodity PSF prices are generally stable at present, although may have softened a couple of cents in some places. Nevertheless, they look set to rise in Q3 as raw materials are strengthening, but so far there are no major volumes settled at higher prices. The extent of the increase depends on the impact of the summer slow-down – as the lower demand could make it difficult to pass on increases quickly. However as PSF prices in Asia are rising, higher prices for imported competitive fibre should support price increases in Europe.

• Prices had risen during Q1 2017 as raw material prices strengthened and fell back in Q2. The extent and timing of any changes now depends on how these Q1/Q2 price movements were handled; if there was a lag in applying the increases, then there will be no decrease at this time as prices are held to recover losses. The next move will be up.

• The graph on the previous side shows the strong growth in PSF consumption in Russia, which rose +13% in 2016 and is already +18% ahead by the end of Q1 2017. This is good news for the Ivanovo investment.

Staple demand especially into nonwovens enjoys robust demand in first half of 2017 PSF prices in Europe moving firmer

The impact on Europe of actions abroad

• Looking abroad, we see in Korea the export prices for low melt PSF remained stead (at $1.30-1.35/kg) as we wrote the report, but there was also talk of higher pricing soon (e.g. another +5 c/kg). Our European reference price range for 4.4 (PET/coPET) PSF remains flat at €1.42-1.67/kg for the time being, but may well rise soon as these import prices come through.

• There could be an impact if the recent ADD actions in USA on spinning fibre and low melt fibre are successful. If the current suppliers lose some of this market then Europe is a good alternative target. Also the new capacities in place or announced for installation in Russia, Eastern Europe and Turkey in the coming years may also deflect Asia imports towards Western Europe. In Turkey more than >50% of the current textile mill consumption is made up of imports from Asia. Also Turkey may try to export new excess capacity to Europe. But as there are already significant volumes imported into Western Europe we expect the price for commodity PSF in Europe to fall over time.

• Remaining domestic suppliers already have a defence strategy, and that is through differentiated and well specified products which are hard to emulate; performance is not easily met by others. These are often branded products, delivering good aesthetic or technical performance, and with a level of service only possible from local supply. The current industry structure has domestic supply at stable and higher prices compared with imported commodity grades at lower prices which track global raw material movements. If the new level of competition for import business widens the price gap still further, will this structure remain intact?



Nylon Chain – Benzene

• Summary: Benzene – bearishness in Asia continues to apply pressure to global prices. New production capacity additions in Asia are already affecting the international marketplace as Chinese buyers continue to hold out for lower prices.

• Asia: The Nippon Oil contract price for July settled at $750/t, -$25/t lower than June’s settlement.

• China Petrochemical: After increasing from $749/t to $769/t in June, Chinese prices for petrochemical-sourced benzene are likely to decline in July, driven mainly by large inventories and international prices.

• USA: The final benzene contract price for July was set at $2.51/gal (around $751/t), a decrease of 19-20 c/gal (-$57 to -60/t) from June. Prices tracked the general downturn in hydrocarbon values, but, as is often the case, did not fall to quite the same degree. See graph.

• Europe: The July benzene contract price was settled at €695/t, or $793/t. This represents a decline of $31 or €42 from June. In USD, the settlement is $39/t higher than the dollar settlement for June.

• As expected, a double-digit drop in the price of benzene occurred given the fall in OPEC crude and the good supply-demand balance.

• The forecast: July confirms the new marketplace dynamics; Chinese buyers stepped back and prices quickly moved lower. Higher price volatility appears to be the new normal. Another small decrease in August would not be surprising.

Waxing supply and waning demand in China put pressure on short term prices

Prices & short term forecast

Comparison of regional benzene prices

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China (Coal) China (Chemical) EU

USA NE Asia



Nylon Chain – Intermediates Asia

• Sinopec settled July contracts at RMB14,500/t (+10% or +RMB1,350/t). The company originally nominated contracts at RMB13,300/t, but increased four times (to RMB13,600/t, RMB14,000/t, RMB14,600/t, and RMB15,000/t) before settling.

• Fibrant Nanjing settled July contracts at RMB14,550/t (10% or +RMB13,50/t). The company originally offered July contracts at RMB13,400/t, but increased to RMB13,700/t, RMB14,000/t, RMB14,500/t, and RMB15,000/t.

• $-based contracts – A few July deals were settled at $1,650-1,700/t (+3-5% or +$50-80/t). Buyers use imported CPL mainly to make polymer for export.

• $-based spot prices – Mainstream spot prices were done in the range of $1,570-1,750/t (5-9% or +$70-150/t). Buyers who make polymer for export generally do so using imported CPL.

• Luxi apparently cannot give its fans cheap CPL at the moment. Other suppliers took a chance and raised spot prices sharply. Mainstream spot prices are in the range of RMB13,300-15,000/t (13-16% or +RMB1,700-1,800/t). However, PCIWM believes that domestic spot prices will decline when the new capacity gets operating approval.

Spread of PA66 over PA6 narrows slightly in July as PA6 prices rise

CPL prices China

CPL prices Taiwan • Domestic contracts – CPDC referenced import contract prices in June

and settled July’s contract at $1,610/t (10% or +$140/t) in late June. The company is negotiating the August contract this week.

• Seeking higher profits, CPDC sent several shipments to the US and Europe (prices undisclosed); however, the exports are not in the regular base yet.

• Import contracts – June contracts were settled at $1,500-1,620/t (+1% or +$20/t). July contracts were offered at $1,650-1,700/t. One supplier settled at $1,575/t in early July, but the others were still negotiating at our editorial cut-off date. CPL sellers’ are seeking $1,700/t, which is close to Sinopec’s settlement. However, CPL buyers are finding it difficult to push their polymer selling prices as high as $1,900/t and also see a PA6/CPL spread of just $200/t as unacceptable.

• Spot prices – Polymer demand from China remained strong and Taiwanese polymer producers bought more CPL on the spot market in July. The deals done in early July were in the range of $1,550-1,600/t, with a few transactions in the $1,620-1,700/t range in the second half of the month. Buyers want to be sure to have ample inventory for September.



Nylon Chain – Intermediates Asia

• $-based prices - Demand for high speed spinning (HSS) polymer from China was stronger in July than in June, due to more enquiries from China. Mainstream prices are in the range of $1,850-1,900/t (+3-7% or +$50-120/t). Taiwanese polymer producers are trying to raise the price to $1,950 to cover higher raw material costs, but most buyers are balking. Taiwanese polymer producers increased rates to 50-90%.

• RMB-based prices – GSS polymer prices are in the range of RMB14,500-16,900/t (+6-12% or +RMB800-1,800/t). HSS polymer prices are in the range of RMB14,600-16,600/t (7-11% or +RMB1,000-1,600/t). Although demand in China improved from both the textile and non-textile segments, non-textile appears to be stronger. The average operating rates in China increased to 70-85%.

• $-based prices slightly decreased in textile and industrial yarn $-based prices fell slightly in the textile and industrial yarn segment, but prices for high-end EP rose by around 3% in certain deals. The mainstream prices are in the range of $2,600-2,700/t (-1% or -$30/t ) as a result of weak demand in Asia. Some buyers in Asia would like to discuss Q4 prices and volume in August. Because of China ShenMa’s outage, PCIWM believes that spot prices will climb in August.

• RMB-based prices increased slightly in the first-half of July, then leaped when the market heard about China ShenMa’s accident. The spot prices were mainly in the range of RMB19,500-20,500/t (+3-4% or +RMB500-700/t). Suppliers are now offering RMB21,000/t. Overall demand from EP compounding and industrial fibre weakened in July. Some downstream producers shut down for a month so as to reduce inventory.

Spread of PA66 over PA6 narrows slightly in July as PA6 prices rise

PA6 prices

Spread PA66 vs. PA6 decreases in July • In July, PA66 prices declined while PA6 prices rose, thus narrowing the

PA66/PA6 spread to $815/t. Some suppliers no longer reference PA6 polymer prices as an index. However, downstream producers are still considering switching from PA66 to PA6 polymer if the spread gets wide enough.

PA66 prices

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Nylon Chain – Intermediates Americas

• Caprolactam – Price consolidation took place in July after an increase last month of 3-4 c/lb ($66-$88/t). Benzene contract prices fell by -$59/t this month, prompting CPL buyers to demand a decrease despite brisk CPL demand and balanced local availability. Producers went to the negotiating table seeking at least part of the price increase they failed to get last month, but ended up accepting a rollover compared with previous month. The CPL price spread over benzene remains above $1,000/t. In our assessment, despite the significant benzene price decrease (-$59/t), the July price consensus is a rollover compared to June. We are accordingly publishing provisional figures of $1,819-$1,822/t for EP grade.

CPL and PA6 price rollover despite drop in benzene

CPL Prices Polyamide • PA6 – Producers fended off buyer demands for price reductions after a

significant (-$59/t) benzene decrease. PA6 prices in the US merely tracked the movements of CPL. By our assessment, despite the significant benzene price decrease (-$59/t), the July price consensus is a rollover compared to June. We are accordingly publishing provisional figures of $2,508-$2,677/t for EP grade. For the fibre grades some price discounts have being heard at around -$100/t in the top range. Mohawk starts to be more aggressive with prices in the low range and being the benchmark in the Fibre industry.

• PA66 – By our assessment, EP grade prices were unchanged month-over-month in July. The fibre grades lost only -$35/t at the bottom and -$100/t at the top end. The spread between PA66 and PA6 remains unchanged at around $434/t, which is still high given an historical North America average of around $300/t. See graph.

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Nylon 6 Polymer (EP grade) CFR Caprolactam (Molten, Large, Domestic) Contract DEL Benzene Contract FOB

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Nylon Chain – Intermediates Europe

• Caprolactam – Market demand is softer than in previous months for seasonal reasons. July prices are confirming the moderate downward trend that began in June. At the extremes, there are buyers asking for triple digit decreases and producers seeking rollovers. However, the clash is not as violent as it might seem as both sides agree that price volatility could disrupt the market and should be avoided.

• It was ultimately difficult to resist lower prices since supply is increasing from local, EU, or even Asian sources. Keen on volume, CPL suppliers accepted discounts somewhat larger than they wanted to get it. Deals are reported in the -€55 to -€80/t range with rumour of transactions as low as -€100/t, but no confirmations at this level.

• Some buyers are waiting for better conditions and therefore downsized July purchasing. Since the major deals were done at -€55 to -€80 without many transactions at lower prices, our provisional published price is -€65/t across the board. The expectation for August is still negative as PA6 demand is easing and this business traditionally slows down in the summer.

• PA6 polymer – Supply now exceeds demand despite some maintenance turnarounds. Early in the month some deals occurred at -€60/t, but something on the order of -€100/t prevailed in the final week or so. By our assessment a provisional -€90/t across the board is being published to be reviewed in the August report. European fundamentals are still looking positive. The seasonal slowdown may even help negotiators reach a price compromise that is acceptable to both sides.

Strong demand, tight supply but strong signs of bigger price decreases in July

CPL prices

PA66 prices • By our assessment, sellers in July granted buyers price reductions on

the order of -30 to -50€/t, partly as a good-will gesture. On the other hand, some deals were also done at rollover. This month we are publishing provisional prices of -€45/t across the board.

• The price gap between PA66 and PA6 increased again in July to

€722/t because PA6 fell farther than PA66. See graph below.

PA6 prices

3,200 3,000 2,800 2,600

2,400 2,200 2,000 1,800 1,600

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Nylon Filament Asia – NTF

• Chinese nylon textile filament yarn manufacturers increased prices by +RMB500-1000/t in response to the move by local CPL manufacturers to control operating rates, which led to a relatively tight CPL supply situation. But currently CPL supply does not seem as tight as Q4 last year. NTF yarn sales look acceptable with stock levels at around 25 days, down 3 days on last month. The NTF industry operating rate in China is similar to last month, at around 72% currently.

• Plants with new capacity in Fujian Province, southeast China, include Jinjiang Science & Technology Group which has delayed full implementation of its NTF spinning project to focus on its CPL investment. But a first phase 30ktpa NTF capacity should still be installed by end-2018. Highsun confirms that its 80ktpa NTF spinning project is still on schedule.

NTF price increased again following last month’s increase

Nylon textile filament news from China

Domestic NTF prices in China • Chinese POY spinners are trying hard to push up the prices, but the

texturisers are resisting. After difficult negotiations 86f24 semi dull, POY high-end product settled at RMB17,500-18,000, up +RMB500/t on last month. The same specification for lower-end markets in Hai’an and Zhuji settled at RMB17,200-17,500/t, also up +RMB500/t on last month.

• DTY activity has been supported by very active integrated texturising/air covering for the spandex business which is running at 80-100% utilisation. But circular knitting is still at a low operating rate of 40-45%, and conventional spandex covering and hosiery knitting are at around 55%, which is not helping broader DTY demand. The situation in these sectors has now lasted for quite a long time. DTY 70f24 semi dull is up +RMB1,000/t for low-end prices and +RMB500/t for the higher range.

• FDY for markets such as warp knitting and weaving are solid, supporting good offtake in this product sector. FDY 40f12 full dull for warp knitting, medium to high end, is up +RMB700-800/t on last month. The delta between CPL and FDY has narrowed compared to early 2017 but remains at higher levels than over the last two years (see graph). Selected PA6 textile filament prices in China (RMB/t)

Type Denier40f12-14 19000 - 20000 19800 - 21000 800 1000

70f24 18000 - 18500 18800 - 19200 800 700POY 86f24 17000 - 17500 17500 - 18000 500 500

30f10-12 24000 - 25000 24500 - 25500 500 50040f12-14 22500 - 23000 23000 - 24000 500 1000

70f24 19000 - 20000 20000 - 20500 1000 500

June July Change

FDY

DTY

0

5,000

10,000

15,000

20,000

0

10,000

20,000

30,000

40,000

RMB/t RMB/t Ja

n-17

Jul-1

6

Jan-

16

Jul-1

5

Jan-

15

Jul-1

4

Jan-

14

Jul-1

3

Jan-

13

Jul-1

2

Jan-

12

Jul-1

1

Jan-

11

Jul-1

0

Jan-

10

Delta CPL (Spot ExW) FDY

China – FDY vs. CPL



Nylon Filament Asia – NTF/NSF

• NTF producer margins are basically the same as last month with average filament prices up by +RMB700-750/t, similar to the price increase of high speed grade PA6 polymer. Despite short-term trends, CPL supply is not expected to be as tight as last year, so the markets expect CPL / NTF prices to be stable over the short term.

• In China prices for nylon staple fibre (NSF) 1.5 denier 38mm settled at RMB17,000-17,500/t, the same as last month. This suggests that the spinners’ margins were squeezed since polymer prices are up around +RMB700/t. Some NSF spinners are running at breakeven. Conventional covering is running at lower utilisation while the wool industry tends to accept higher prices for nylon staple (for blends). Prices are expected to rise soon on higher demand from these sectors.

NTF producer margins largely unchanged

Price spreads in Asian PA6 textile chain

Asia nylon filament production • Data for nylon filament production in Asia is emerging from a number of

sources, largely the regional man-made fibre associations. Data is not reported on a uniform basis by country, but the apparent numbers suggest that Q1 2017 activity has generally shown progress within the Asian region. As indicated below, the largest apparent increase is in China where official data suggest a nylon filament increase of +6% in Q1 2017 in comparison with the previous year (+46 kt). We note that no new data has been made available from China beyond March 2017 where local sources suggest that the accuracy of recent data is under official scrutiny.

• NTF demand in Taiwan is good and PA6 fibre producers are running at

about 90-100% utilisation rates. The solid demand has meant fibre buyers have had to accept price increases of a further +8 c/kg (+3%) justified by higher raw material costs.

0

500

1,000

1,500

2,000

2,500

3,000

3,500$/t

Jul-17

Apr-17

Jan-17

Oct-16

Jul-16

Apr-16

Jan-16 2226

65

2525

68

40

820

20

60

840

800

0

kt

Korea Japan Taiwan China

827

781

Q1 2016 Q1 2017

Production of nylon filament in Asia

Price spreads in Asian PA6 textile chain

TF/PA6 PA6/CPL CPL/BZ BZ/NAP

OPEC Oil NAP/Oil



Nylon Filament Asia – NIF

• The global auto industry has high hopes for growth in China and the June 2017 data from the China Automobile Industry Association do not disappoint. These show production at 2.167 million units, up +3.9% on last month and +5.4% year-on-year. Sales at 2.172 million units are up +4.5% year-on-year. Cumulative sales in China to June were 1.3354 million, +3.8% year-on-year, although the growth rate is down -4.3% versus the same period last year.

• Motorcycle production in June was at 1.576 million units, up +4.2% and +12.64% year-on-year. Cumulative motorcycle production and sales for the January-June 2017 period were around 8.5 million units each, up around +4% year-on-year.

Nylon industrial filament prices went up this month Auto and motorcycles sales are good

NIF & TCF pricing in China (domestic and export)

• Last month, nylon industrial filament (NIF) prices were flat or even reduced because demand was dull. But Chinese NIF yarn spinners have been facing high production cost pressures and have finally managed to increase prices by +RMB500-1,000/t this month. PA6 1260 denier NIF yarn increased +RMB800/t while prices for the same specification tyrecord fabric increased by +RMB500/t over last month’s levels. As shown in the chart opposite, this has stabilised price points after the worrying slide over late Q2 2017.

• Export prices for PA6 NIF yarns accordingly increased by +3 c/kg. Tyrecord fabric prices also moved up by +3 c/kg.

• PA66 yarn and tyrecord prices have remained essentially unchanged for export as shown in the table below. There has been some variability in PA66 raw material price offers within this market but these have been within a small range, so, as in the past two months, PA66 suppliers opted to hold yarn and tyrecord fabric prices reasonably steady.

Prices for tyre yarn and tyrecord in China

Denier Product6 840 Yarn 16500 - 17500 17300 - 18300 800 800 2.30 - 2.40 2.33 - 2.43 0.03 0.036 1260 Yarn 16000 - 17000 16800 - 17800 800 800 2.25 - 2.35 2.28 - 2.38 0.03 0.036 840 Cord 23600 - 24500 24200 - 25200 600 700 3.10 - 3.20 3.13 - 3.23 0.03 0.036 1260 Cord 22500 - 23500 23000 - 24000 500 500 2.95 - 3.05 2.98 - 3.08 0.03 0.0366 840 Yarn 3.05 - 3.15 3.03 - 3.13 -0.02 -0.0266 1260 Yarn 3.04 - 3.09 3.02 - 3.07 -0.02 -0.0266 840 Cord 4.25 - 4.40 4.25 - 4.4066 1260 Cord 4.08 - 4.22 4.08 - 4.22

PA Type

RMB/t $/kg FOBJune July Change June July Change

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Jul-17 Jan-17 Jul-16 Jan-16 Jul-15 Jan-15

$/t

PA66 840 tyre yarn PA66 840 tyrecord PA6 840 tyrecord

PA6 840 tyre yarn

Prices for tyre yarn and tyrecord in China



Nylon Filament Asia – NIF

• Nylon monofilament is a growing market for NIF spinners within the Hai’an area for use in a range of technical textile fabrics. These include basic end-uses such as brush bristles, ropes and fishing lines, through to sewing thread, technical wovens and fine denier printing fabrics across a very wide denier range.

• Chinese monofilament yarn producers have enjoyed operating rates of

80-100% for most of this year. But after nine months of very solid activity, monofilament markets have slowed a little in June and early July with typical prices around RMB22,000/t. However, with the firmness in feedstocks, the prices of nylon monofilament yarns are now moving upward from mid-July settling at RMB22,000-23,000/t.

• Suzhou Otiz started up its PA66 nylon industrial yarn plant in late 2015 and has steadily built activity to achieve current utilisation of over 60%. Otiz is targeting a range of high-quality PA66 markets, including tyrecord and airbags. The company is very satisfied with this build-up in activity in some of the most critical market segments of the industrials business. Otiz attributes this success to its already high profile in the polyester industrial filament (PIF) business where it is already a respected player in a number of market sectors and feel that this has given it significant leverage in launching a new PA66 NIF yarn portfolio. Of course, it is also evident that many of the industrial market segments have a 12-18 month testing and approval timescale, which makes market entry a slow and demanding process.

PA66 NIF investment in China continues

Nylon monofilament PA66 NIF industry investment • The Otiz success points to a slow but steady change in the structure of

the Chinese PA66 NIF industry. This remains dominated by China ShenMa with integrated raw materials and its own programme of steady expansion. However, as shown in the chart below, there has been a wave of new Chinese investments over the past 12–24 months all targeting this same specialist area of the industrial yarns business.

• The list of investors is headed by Dikai and Otiz, both of whom are already well-known suppliers to the industrial yarn markets. But in addition a further 4–5 Chinese companies are moving in the same direction, although with smaller unit investments. Undoubtedly Chinese demand for PA66 NIF cap ply, tyrecord fabric, airbag yarn and sewing thread will increase as it drives for higher technical standards within its nylon industrials business. But domestic Chinese demand is unlikely to increase fast enough to absorb all these proposed new investments.

Chinese PA66 NIF yarn capacity (excl China ShenMa)

0

20

40

60

80

100

120

2017 2018 2014 2015 2022 2019 2016

+54kt

2021 2020 2023

kt

2013



Nylon Filament Americas – NTF/BCF

• It seems that the NTF market has been fighting low volumes due to inventory issues down the chain for many months and eventually it would be expected that this issue will be resolved. The slow down for the 4th of July was again justified by inventory correction and there are some slight signs that, coming back from the holiday, ordering is slightly stronger than it had been. So, perhaps the inventory correction has finally run its course

• No price changes are reported in July.

• In February 2016 we reported the closure of Microfibers one of the largest remaining producers of flocked furniture upholstery fabrics. It has been announced that a Turkish company Tutek Holding through its subsidiary HPFabrics is now buying the Winston Salem plant of Microfibers and is going to carry out upgrades and install new machinery to bring back the flocking activity to the building. At the time of closure Microfibers was using relatively large volumes of nylon fibre. They are planning to create 260 jobs in three years. We assume the benefit to the nylon industry will be in the form of increased sales of nylon staple fibre where both Invista and Ascend have production.

Inventory correction appears to be coming to an end

Nylon Textile Filament (NTF)

Nylon Industrial Filament (NIF) • Markets for heavier deniers have started quite slowly since the holiday

which possibly is partly a reaction to formula driven prices increasing going into Q3. The raw material element of the formula is reflecting the higher prices for nylon 6 raw materials in the March/April/May time period and puts the market into a situation where filament prices are increasing at a time when raw materials are actually in decline. The challenges presented by a lagging quarter formula. The increases are 5–7 c/lb on formula and these are reflected in our price tables.

• Finer denier airbag yarn formulae work on a different time scale and they are seeing price declines going into Q3 of 6–8 c/lb depending on which raw material base is used.

• Markets for lower denier non airbag yarns are quite good with military volumes better than in the past 12 months.

• Chinese import prices have increased by up to 20 c/lb following a strong first five months of the year when volumes were up 47% to 1,260 tons.

• The airbag industry seems to be coming to a resolution of the Takata crisis, with a controlled bankruptcy and Key Safety Systems purchasing much of Takata for $1.6 billion. It appears that the US airbag weaving plant of Takata, Highland Industries, will not be part of the bankruptcy even though they are owned by the US holding company for Takata’s operations in the Americas.

Latin America NTF prices

Origin May-17 Jun-17 Jul-17China 2.90-2.95 2.95-3.00 3.00-3.10China 2.90-2.95 2.95-3.00 3.00-3.10

DTY 70 De circular knittingDTY 100 De circular knitting



Nylon Filament Americas – NIF

• We reported on the sudden closure of California based Royalty Carpet Mills and its two subsidiary companies last month. Predominantly a nylon 66 house they ran BCF from both Invista and Ascend. It appears that both the Dixie Group and Tuftex (a division of Shaw based in CA) will pick up sizeable shares of the volumes handled by Royalty. Dixie has entered into an agreement to purchase the twisting and heat setting assets owned by Royalty at their yarn plant in Porterville CA and they have also agreed to a long term lease of the building. Production will restart week of 31 July.

• In the contract market, Engineered Floor has launched a polyester BCF under the brand Apex SPD which is targeted at the commercial carpet market under its Pentz Commercial Flooring brand. In its promotional material they state “Using the most advanced polyester extrusion process in the industry, Engineered Floors has developed a high-performance polyester fiber that meets commercial requirements traditionally reserved for nylon. And the solution-dyed coloring process and stain resistance gives you a clarity that lasts even in heavy traffic commercial spaces.” This is a major warning to the nylon fibre producers who have felt a degree of protection in the commercial carpet markets. We do not have any data on durability performance and in flammability rating which were both areas that polyester was felt to not perform adequately to meet commercial carpet requirements.

• No price adjustments are reported in nylon BCF in July.

Imported NIF volumes and prices up

Carpet Filament (BCF) Motor vehicle market in Argentina and Brazil • In Brazil data from ANFAVEA, the national association of motor vehicle

manufacturers, shows vehicle sales still improving on 2016. In June sales reached 195 thousand units, almost the same compared with the 196 thousand units sold in May but +13.5% higher than in June 2016. Cumulative to June sales reached 1 million units, up + 3.7% compared with the first half of 2016.

• Cumulative vehicle exports, at 373 thousand units, were the largest number exported in the first half of the year. This was an increase of +57.2% compared with the same period in 2016. In June alone, 66 thousand units were exported, up +40.9% on June 2016.

• Vehicle production for 2017 is now projected at 2.62 million units. This would be a +21.5% rise on the actual number for 2016.

• In Argentina, ADEFA, the association of vehicle plants, reported production up in June to 45,496 units, +0.5% higher than May and +9.2% higher than in June 2016. Cumulative production in the first half of the year was 219,404 units, down -2.1% on the first half of 2016. Exports in June reached 19,701 vehicles, up +36.1% on June 2016.

• The recently updated FTA between Mercosur and Colombia will reduce tariffs to zero (0%) on 97% of traded items. The automotive sector will be one of the beneficiaries and inter regional trade is expected to increase. Argentina and Brazil are able to export and import vehicles to and from Colombia with no tariffs. During the first four years this could lead to an additional 200,000 vehicles traded between these countries.



Nylon Filament Europe – NTF & BCF

• July demand for nylon textile filament (NTF) in Europe was better than expected, after there seemed to be an early summer slow down in June. Raw material prices for PA6 and PA66 have fallen, but NTF filament producers will hold prices flat for longer to help catch up with higher producer margins they have absorbed in Q1 and Q2 2017.

• Aquafil, Italy announced a merger with Space3, a Special Purpose Acquisition Company, which will result in the group being listed on the Italian Stock Exchange, probably by early November. Giulio Bonazzi will continue to lead the company as the majority shareholder. A SPAC is a financial entity which can be listed via an investment in a single company, and it is seen as very positive that SPACE3 chose Aquafil Group in this case. A major result of the change will be the ability to invest further in the successful Econyl brand of regenerated PA6 textile filament (see also our section on Sustainability in this report).

• The recent launch of Nilit's new Sensil marketing package reflects the company's belief in its world-beating range of PA66 textile filament yarns with distinctive technical and aesthetic properties. Nilit thinks its brand package, especially in next-to-body sectors such as intimate apparel and base layer activewear, identifies real value for an empowered generation which does not necessarily respond to traditional marketing methodologies. Nilit has been researching new mechanisms to improve its leverage in the supply chain and to communicate more directly with the consumer. It aims to engage with a young and digitally-connected population, using direct marketing techniques. Given that shifts in demography and technology pose new challenges in the apparel supply chain, this insightful marketing push should underpin PA66 activity in high-value garment segments.

Nylon filament prices flat but weakness ahead as raw materials fall and sales slow for the summer Nylon Textile Filament

Nylon BCF Europe

• In Europe weaker BCF demand has led to yarn prices rolling over in Q3 2017, despite some increases which should have been pushed through from Q2. Some USD based import prices may have fallen a little but as the euro weakened little impact is expected.

• Going forward we would expect further weakening of prices as both PA6 and PA66 raw materials fall. This will be a steady decline, not a precipitous fall, as higher upstream producer margins must now be covered than those in place before the Q1/2 2017 increases.

• Weakness is seen in both commercial and residential carpet segments – although some suppliers are still doing quite well (market shares are moving). Weak residential sales are not only reported in the UK (with Brexit woes) but also in Germany. Automotive carpet sales are still running well, but there are concerns that the good run in the automotive sector cannot keep going for ever.

• As reported before, the level of BCF exports from Europe has fallen by about -30% year-on-year, which is worrying when domestic sales are down, as exports are a way to mitigate low line utilisation levels.



Nylon Filament Europe – NIF

• Demand for nylon industrial filament (NIF) remains good in all major sectors; automotive (tyres and airbags) and general broad loom technical textiles. There is no downward trend in demand at this time, but one cloud on the horizon is in the automotive sector. Although the supply chain is running at full, automotive sales may be softening and a correction could come at short notice.

• Pricing is going through a tricky transition period, with raw materials easing (especially benzene and butadiene whose derivatives are used in both PA6 and PA66) and filament prices often set at least on a quarterly basis with a lag. Tyrecord yarn producers will have seen higher prices for most of this year and may only get relief in Q4 2017 – so it is tantalising to hear of intermediate prices falling and hard not to ask for some relief now. It is also easy to ignore the message that cyclohexane is actually short (impacting CPL supply for PA6). But filament suppliers have had to wear the dramatic raw material increases in Q1/Q2 and want to see more of that passed through before prices fall. For July our reference prices have been rolled over.

• Some suppliers from Asia are said to offer early relief with the expectation of share gain, especially as the Asian market is not as strong as Europe‘s.

Industrial filament sales remain strong but imports and falling raw materials undermine forward prices

Nylon Industrial Filament Polyamide fibre consumption in Russia • Data for Russian mill consumption of various fibre types has become

available and nylon is shown below. Overall consumption was down in 2016, especially early in the year. But there appears to be a recovery in 2017. The biggest demand is into industrial filament and tyres whose share fell to 70% in 2016. In 2017 demand into NIF seems to be recovering, maybe with sanctions blocking imports of finished goods, like tyres, and thus forcing local production.

0

5

10

15

20

25

30

70%

5,1

75%

-2%

17% 23%

5,3

-12%

kt

4,5

+4%

Q1 17 Q1 16 Q1 15 2016 2015

NIF & Tyre NTF BCF NSF

Consumption of nylon fibres in Russia

Source: Market



Propylene & Polypropylene – Asia July 2017

• Asian propylene prices have strengthened into July despite flat naphtha and propane prices and continue to hold up well. July spot propylene prices have averaged $883/t CFR in NE Asia, up $22/t from June. The naphtha price has largely remained flat, and the propylene-naphtha spread has widened further to $464/t.

• With a weakening ethylene price, the spot propylene versus spot ethylene (P/E) ratio is nearing parity, with the Northeast Asia P/E ratio averaging 0.95 thus far. This is the strongest propylene has been relative to ethylene since early 2015, before the slew of on-purpose propylene capacity was brought online. PDH margins have also improved.

• CFR China PP prices averaged $995/t in June and are $985/t MTD. Prices declined slightly as the Chinese market is still showing no signs of reversing trends. Import activity is still slow as well as sluggish demand. Downstream facilities are running at reduced rates due to stricter enforcement of environmental regulations to reduce pollution.

• If the downstream demand for PP in China remains low then domestic inventory levels will remain high and therefore imports will be forced out of the market.

• CFR SEA prices averaged $1,048/t in June and are $1,045/t MTD. Prices remained relatively flat amid continued lacklustre demand as Eid holidays persist in countries such as Malaysia and Indonesia.

Asia propylene edged up but PP prices are flat as demand has been weak due to holidays Asia propylene and PP highlights

China v SEA PP prices

• Our reference price range for fibre grade PP remains at $1,000-1,085/t, CFR China.

900

950

1,000

1,050

1,100

1,150

1,200$/t

18-J

ul/T

ue

10-J

ul/M

on

03-J

ul/M

on

26-J

un/M

on

19-J

un/M

on

12-J

un/M

on

05-J

un/M

on

29-M

ay/M

on

23-M

ay/T

ue

17-M

ay/W

ed

11-M

ay/T

hu

02-M

ay/T

ue

26-A

pr/W

ed

20-A

pr/T

hu

14-A

pr/F

ri 10

-Apr

/Mon

04

-Apr

/Tue

29

-Mar

/Wed

23

-Mar

/Thu

13-M

ar/M

on

07-M

ar/T

ue

01-M

ar/W

ed

CFR China CFR SEA

PP Homo yarn/inj CFR China vs. CFR SEA prices

Source: Wood Mackenzie



Propylene & Polypropylene – North America July 2017

• US spot polymer grade propylene prices have been stable for several months, with July prices down -1 c/lb or nearly 3% from June to 36.4 c/lb ($802/t). July contract prices settled up +0.5 c/lb to 39 c/lb due to prolonged PDH outages which kept inventories below the five year average. Flint Hills wrapped up a three month turnaround in late June while Dow finished a thirty day outage in mid-July. Recovering PDH production will be offset by reduced steam-cracker production, as ethane cracking is +3 c/lb advantaged versus LPG cracking. Q3 2017 propylene production from steam-crackers is expected to fall -8% versus Q2 2017.

• Since mid-June, domestic North American polypropylene demand is at a record high level, +6.6% higher than in April 2016, the last record high domestic demand in a given month. Strong domestic demand was expected after a long period during most of Q2-2017 waiting for the bottom in regional polypropylene prices.

• In July, inventory levels are at 22 days of demand vs. 33 days seen in

Q2-2017. High inventory draw downs are triggering polypropylene price increase nominations, ranging from +3-5 c/lb, in addition to any change in polymer grade propylene (PGP) prices.

• In July 2017, the spot domestic prices of polypropylene is at $1,224/t an increase of +$22/t from a month ago. We expect prices to increase by another +$45/t by the end of this month due to low inventory levels and strong domestic demand. Our PP reference prices in US domestic markets is therefore taken up +$20/t to $1,070-1,180/t.

US prices stable as rising PDH production is met by declining steam-cracker production NA propylene and PP highlights

Spot propylene prices and US inventory

0

200

400

600

800

1,000

1,200

1,400

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Mar

-16

May

-16

Jul-1

6

Sep-

16

Nov

-16

Jan-

17

Mar

-17

May

-17

Jul-1

7

Sep-

17

$/t Inventory (kbbl)

EIA Inventories (RHS) Propylene Price (PGP, USA)

Source: Wood Mackenzie, EIA, Ventyx



Propylene & Polypropylene – Europe July 2017

• The July monthly contract price (MCP) for propylene in Europe was agreed at €790/t, a drop of -€50 from the June settlement. Spot propylene prices averaged $885/t in July, a -$49/t decrease from June. The propylene supply source is not impacted by the outage of the Ellba POSM unit in Moerdijk, Netherlands, and the market remains in good balance. The July propylene/ethylene MCP ratio (non-discounted) currently sits at 0.82. As with July, the August propylene MCP settlements will likely follow the movement of naphtha prices which are expected to move upwards throughout the month. However, with PP demand boosted in July by some re-stocking of inventory, demand in August could come under pressure, this being the holiday season in Europe.

• TOTAL announced the completion of the first stage of its Antwerp ethylene platform redevelopment, involving modifications to handle ethane feedstock. The lighter cracking feedstock is expected to reduce propylene production by approximately 100ktpa.

• Grupa Azoty announced plans to consider PP capacity as part of its PDH project in Police, Poland. Previously the project was configured to back integrate into oxo-alcohols production and sell propylene monomer to the merchant market. It is our assessment that PP integration should enhance the project economics, but with Borealis and INEOS announcing major PDH projects integrated into C3 derivatives, including PP, the field seems too crowded for all three.

• Our July reference price for fibre grade PP fell -€30/t to €1,200-1,290/t.

Propylene spot and contract prices fall in Europe taking PP prices down Europe propylene and PP highlights

NWE PP Prices and Propylene outages

NWE polypropylene contract prices

Source: Polymer Update; Wood Mackenzie

1,000

1,100

1,200

1,300

1,400

Apr-16

Jan-16

Apr-17

Jul-17

Jul-16

€/t

Jan-17

Oct-16

Contract Del NWE Injection Moulding

European propylene capacity loss from maintenance

Source: Wood Mackenzie

020406080

100120140

kt

Oct-16

Jan-17

Apr-17

Jul-17

Oct-17

Jan-16

Apr-16

Jul-16

Planned Unplanned



Acrylic Staple Fibres Weak AN and ASF pricing continues

• Acrylic fibre demand remains weak. In Europe downstream textile mills are shifting into summer holidays and postponing orders to see if they can obtain lower prices on their return. In Asia, and particularly in China, domestic demand is low but demand for wool type is picking up as downstream textile mills start to prepare for autumn/winter production.

• Indian domestic demand is struggling to adapt to the introduction of GST (see the Leader section). Since many small and medium sized companies, including those in the textile sector, are still working out the details demand for fibre is weaker than is usual at this time of year.

• ASF prices are down -5 c/kg for July in most main markets. However, fibre producers are optimistic about achieving some margin recovery, particularly in Europe. The expectation is that demand will improve after the holidays as the European textile industry gears up for autumn/winter.

• In Korea ASF prices continued to soften with the price for 1.5 denier dropping -5 c/kg at the lower end of the range to $2.10-2.20/kg.

• AN prices in all main regions continue easing. Downstream demand is still weak and prices have been adjusted down. Spot prices are in the range $1,300-1,400/t, with Europe spot prices at the high end and Asia and US Gulf at the low end.

• AN Europe contract prices were agreed at €1,771-1,788/t FD (free delivered) NWE northwest Europe, down -€73/t. US July AN domestic contract prices are not settled yet but they appear to be heading down as well. For reference US June AN domestic contract prices were 55.25-59.25 c/lb.

• US and European AN production activity is returning to normal following stoppages last month for maintenance and Force Majeures. Trade flows are still limited however since some producers haven’t refilled inventories or are able to produce at full capacity.

• The US AN producer Cornerstone with 240 ktpa capacity in Waggaman, Louisiana, is in the process of being sold to Littlejohn & Co., a private equity firm. The transaction is expected to close in August 2017.

• In China at least four AN producers have announced shutdowns for maintenance in the next two months choosing to do so at this time since demand is weak. Chinese AN producers still face a challenge from imports. From January to May this year monthly imports were above 20 kt, approximately 12% of Chinese capacity. However imports in June dropped sharply and the cumulative for the first six months of the year is down 23% on 2016.

AN prices fall in all major regions No pick up in demand for ASF yet

Acrylic fibre prices

Origin Unit May-17 Jun-17 Jul-17Tow 3 Denier America USD/kg 2.30-2.40 2.25-2.35 2.20-2.30Tow 3 Denier Asia USD/kg 2.00-2.10 1.90-2.00 1.85-1.95Tow 3 Denier Europe €/kg 2.20-2.30 2.15-2.25 2.10-2.20



Dissolving Woodpulp and Cotton Linter Pulp

• The sustained upturn in viscose staple pricing has helped to raise the price for imported viscose staple (VSF) grade dissolving woodpulp (DWP), the principal source of high purity cellulose used by Chinese VSF plants.

• The price for imported DWP fell to a low in June. But in the first half of June the price for imported hardwood VSF grade DWP reached $850-855/t, a +$15-20/t increase. Meanwhile, the July price for imported softwood VSF grade rose by +$30-40/t to $935-945/t. The greater increase in the price for softwood VSF grade DWP reflects the tightening supply of this grade, which many Chinese VSF producers require in their high purity cellulose feedstock.

• There has also been an increase in the price for domestically produced VSF grade. This has reached RMB7,100-7,300/t ($893-918/t excl. VAT) for domestically produced hardwood DWP, a +RMB300-400/t ($39-52/t) increase. Given the difficulty (and cost of) sourcing softwood chips, the Chinese DWP producers are largely producing hardwood VSF grade DWP and no price was reported for domestically produced softwood VSF grade DWP.

• There are reports that flexible domestic DWP producers in southern China have switched production to paper grade pulp, which currently offers better margins.

• This takes our reference price for DWP imported into China to $870/t for July 2017.

Stronger downstream demand has helped to lift dissolving woodpulp prices

Dissolving woodpulp Cotton linter and cotton linter pulp • VSF grade DWP’s superior quality has contributed to lower demand for

cotton linter pulp (CLP). So has the higher price for CLP compared with DWP. This has led to reduced demand for cotton linter (CL), a by-product of cotton processing and the feedstock for CLP production. China CLP producers were able to source their CL needs from domestic sources but reduced supply, the result of (i) reduced Chinese cotton production, (ii) increased use of hairy cottonseed as a livestock feed and (iii) lower CL yield from GMO cotton and new cotton varieties.

• This has helped to tighten CL supply and contributed to CL prices stabilising at RMB4,700-5,000/t ($612-651/t excl. VAT) in mid-July, unchanged from the end of June. This price is expected to increase by RMB100-200/t ($13-26/t) over the second half of the month.

• Tight supply has meant that in order to meet their CL feedstock needs, Chinese CLP producers have had to look at CL sources outside China. This includes India, Uzbekistan, Turkmenistan and Turkey. The quality of much of this imported CL is poor but the tight market has helped to lift the price of this CL by 40% over last year to RMB4,200-4,400/t ($547-573/t excl. VAT). These developments contributed to a RMB100/t increase in the price for VSF grade CLP in the first half of June, which left the price for this grade at RMB7,100-7,300/t ($813-918/t excl. VAT), the same price as domestically produced VSF grade DWP. A further increase of RMB100/t ($13/t) is anticipated in the second half of the month.

• The price for viscose filament (VFY) grade CLP is unchanged at RMB9,000-10,000/t ($1,132-1,258/t excl. VAT).



Viscose Staple

• A buoyant domestic Chinese viscose staple (VSF) market has seen VSF demand strengthen in July. Despite sustaining high capacity utilisation rates – these have stayed at 92% despite some capacity coming off-line in order for plants to comply with environmental standards - VSF producers have had to cut inventories in order to meet demand. As a result, stock levels have dropped to five days, down from nine days in June.

• This increased activity to meet higher downstream demand (and to restock depleted inventories) has led to higher VSF prices. These are RMB1,000-1,100/kg higher in mid-July at RMB15,600-15,800/t ($1.96-1.99/kg) for medium quality 1.5D, 38mm VSF. For high quality VSF the price has risen to RMB15,800-16,000/t ($1.99-2.01/kg).

• The export quote for 1.5 denier 38mm VSF has also risen. It is now $1.99-2.05/kg. This represents a USc4/kg increase at the lower end of this price range and a USc2/kg rise at the higher end. This takes our reference price for VSF to $1.96-1.99/kg for July 2017.

• July has seen a clear improvement in Asian market sentiment partly on the back of increasing prices in China (in turn supported by rising polyester prices). Other Asian prices rebounded over the past month, by a +5-13 c/kg in July (having fallen by around -25 c/kg between March and June). The exception is India with high and stable domestic prices. Viscose yarn prices have also increased in line with the increase in fibre prices. Nevertheless, Indonesian viscose spinners are struggling to compete and there has been a number of factory closures and reductions in capacity announced this year.

The Chinese viscose staple market has rebounded strongly

Viscose staple Asia VSF prices outside China

100120140160180200220240260280

Jul-17 Apr-17 Jan-17 Oct-16 Jul-16 Apr-16 Jan-16

c/kg Monthly prices for viscose staple in Asia (except China)

India domestic India CIF Indonesia CIF

Vietnam CIF Pakistan CIF

Indonesia domestic

Source: PCI Wood Mackenzie

Country / conditionsIndia, domestic for spinning 2.40 - 2.40 2.40 - 2.40 0 0India, import CIF 2.05 - 2.06 2.10 - 2.12 5 6Vietnam, import, CIF 1.90 - 1.95 2.00 - 2.05 10 10Indonesia, domestic 1.94 - 1.95 1.99 - 2.00 5 5Indonesia, import, CIF 1.90 - 1.92 2.00 - 2.05 10 13Pakistan, import 1.80 - 1.83 1.93 - 1.95 13 12

June July Delta c/kg



Viscose Filament

• In contrast to VSF, the Chinese viscose filament yarn (VFY) market remains stagnant. While operating rates remain high at 95%, much of this output is destined for inventories, which have increased again, by +1 day to 80 days. While VFY demand remains flat, rising costs for high purity cellulose feedstock compelled VFY producers to lift their prices. By mid-July the price for medium quality 120 denier bright VFY had risen by +RMB500/t (+7 c/kg) to RMB36,500-41,000/t ($4.59-5.16/kg).

• VFY is primarily used in linings and other woven and knitted fabrics for high-end goods that exploit its high sheen, smoothness, softness and high depth of colour. Its high price (and the need to dry clean VFY fabrics) has meant, however, that it has lost substantial markets to competitively priced polyester filament. China dominates the global VFY market, accounting for three quarters of global capacity (an estimated 275ktpa in 2017). India accounts for a little over a fifth of global capacity, with the balance found in Europe. China is the largest VFY supplier to the global market, exporting nearly a third of its output. The principal destinations include the major textile industries of Pakistan, India, South Korea, Turkey and Italy.

• Although adversely impacted by the global recession, the global trade in VFY had been trending upwards, but since 2010 the volume traded has slowly trended downwards up to 2016 when there was a sizeable fall in export volumes. However, export volume in the first four months of 2017 were little changed (year-on-year). Much of this decline in export volumes has come from lower Chinese exports, which averaged close to 60ktpa between 2007-2015. This implies increased uptake by domestic producers as Chinese production has been flat, ranging between 190-200ktpa over the past decade.

Downward trend in exports appears to be easing so far in 2017

Viscose filament Viscose filament • There are eight VFY producers in China although the market is

dominated by just two, Xinxiang Bailu (Xinxiang, Henan) and Jilin Chemical Fiber (Jilin), which includes a subsidiary Jilin Enka Viscose Fiber, a 5ktpa joint venture established in 2006 between Jilin Chemical Fiber and the Germany VFY producer Enka to produce continuously spun VSF. These two Chinese producers account for just over half of Chinese capacity and are set to add further capacity by 2020. There are a further four VFY manufacturers in India with a combined capacity of some 64ktpa. Much of their output is used within the Indian market. Finally there are two manufacturers in Europe, a small plant, Svilosa, in Bulgaria, part of the Edoardo Miroglio Group, and Enka in Germany, which has a finishing plant in Poland.

Note: Because reports of viscose filament exports are suppressed by some European countries, we have used implied exports (based on imports from selected countries) to track the global trade in VFY.

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Exports of viscose filament from major producing countries



Spandex

• Chinese MDI prices fell again this month following a -RMB1,000/t drop in June, Wanhua’s prices fell by -RMB1,500/t. There is sufficient supply but downstream demand seems cautious and orders are being placed only to satisfy their immediate needs.

• The market and prices for PTMEG in China are generally stable, with only -RMB300/t down at the lower end of the price range and unchanged for the higher end. Some companies that started maintenance in June have re-started and taking the utilisation to 80% from 73% last month. Whilst 80% utilisation is not considered as high usually, stock levels have risen to 39 days currently from 36 days last month. So, as mentioned in last month’s Fibres Report, there will be some restrictions on production in July, to bring stocks back under control and manage prices.

Spandex market remains soft in China

PTMEG and MDI Spandex prices • Spandex prices fell this month in China, down another -RMB1,000/t for

most products, following a similar reduction last month. Downstream markets are not so active and there are few yarn purchases simply for stock, as further price reductions are expected with ample supply of MDI and PTMEG.

• Export prices dropped -10 c/kg for both 20 denier and 40 denier, a more

moderate fall than in the domestic market.

• Downstream utilisation rates are down slightly in circular knitting but in other utilisation is either flat or a little higher.

Downstream utilisation rates Product June JulyRMB (000/t) RMB (000/t)

MDI 27.00-27.00 25.50-25.50PTMEG 18.30-19.00 18.00-19.00

ProductRMB (000/t) $ (000/t) RMB (000/t) $ (000/t)

20 denier 41.00-47.00 5.05-5.80 40.00-46.00 4.95-5.7040 denier 34.00-41.00 4.50-5.10 33.00-40.00 4.40-5.00

June July

Prices for key spandex raw materials

Spandex prices

Downstream Segment June July Deltaconventional covering 60% 60% -cotton covering 63% 63% -warp knitting 70% 72% 2%circular knitting 45% 41% -4%air covering 79% 88% 9%



Spandex

• We have changed our report format and this graph has been moved from the back page into the spandex section. To the China spandex price (for 40 den warp knit), we have added PTMEG and MDI.

• As you can see spandex prices in China have fallen again this month as raw material prices flatten or even weaken.

Trade increases in response to growing demand for spandex

Asia spandex & raw material trends

Spandex shows encouraging export growth • Global spandex exports are not easy to track due to reporting

differences between some countries, for example forcing the need for reverse trade (RT below) in some cases. Our analysis which shows that exports from major exporting countries are growing at 6% (CAGR) over the last 6 years but accelerating now; with +9% last year and in Q1 2017 even +13%. Vietnam is clearly a major beneficiary of growing demand for spandex, underscoring Hyosung’s role as a global supplier.

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Spandex prices (China 40 den warp knit), MDI & PTMEG

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ROW

Growth in spandex exports

Source: GTT. *Vietnam is reverse trade.



Spandex

• There continue to be shortages of pure MDI in Europe after shortages from Huntsman, Covestro and Borsodchem (Wanhua), and prices remain high, thus impacting spandex operating costs. Crude MDI for rigid insulation is the larger demand and supply there is really tight, which will impact supply of pure MDI. Some TPU producers (who also use pure MDI) suggest they can only source enough to keep ticking over, and the tightness may remain right to the year–end.

• BDO prices are rising another €150-200/t in Q3 and PTMEG has also been tight; there has been less supply from Dairen compounded by shipping issues in Korea, BASF Geismar (USA) had been in Force Majeure for a couple of months, BASF Ludwigshafen (Germany) struggles to run at full rates since their fire last year. The limited PTMEG supply has been directed to meet spandex demand, essentially shorting the merchant (PU and COPE) markets and prices have risen by approaching +50% since Q4 2016.

• July demand in Europe was lower than in June but overall the market

appears better than last year. Warp knit demand into sportswear and intimate apparel is good, but circular knitting is less buoyant and the hosiery segment remains weak.

• Despite the raw material shortages and price increases there seems to

be little talk of higher spandex prices in Europe at this time. After all the summer lull is not a time to risk driving prices ahead, and our European reference prices in July remain unchanged.

Prices stable in Europe, and North America quiet but braced for news on Lycra

EU prices flat despite raw material shortages Invista covered in our Global Spandex Report • In North America markets have been slow coming out of the 4 July

holidays as both knitters and weavers gradually get back to production. It is expected that volumes will recover and that there is not a structural decline at this point in time.

• With respect to Invista's apparel business (which includes Lycra brand spandex), trade reports suggest that several interested parties are actively looking at this desirable business. There appears to be strong interest from a large Chinese textile producer, with current spandex capacity but ambitious expansion plans in this sector. There are suggestions that a formal deal could be announced in the current quarter. If this Invista business were eventually sold it would have wide repercussions through the industry. On the other hand, once Lycra's destiny is clear one could imagine that some of the unsuccessful bidders may seek other branded spandex businesses to satisfy their awakened appetite and fill this gap in their portfolio, thus leading to further change or consolidation of this specialist industry.

• PCI Wood Mackenzie's Global Spandex Market Report 2017 is now available. Contact us for more information.

• As the industry is undergoing fascinating change, this report explores how spandex is graduating from a minor player in specialist garment segments to a more omnipresent feature of the global textiles industry. The report looks at the role of spandex in the world of stretch fabrics and provides an update on the status and dynamics of the sector. The report also includes estimates of sales by denier in over 15 typical deniers, for 2000, 2012 and 2016. Also with commentary on denier trends in the main applications.



Cotton

• International cotton prices, the Cotlook A Index (FE), have been up then down and then back up in the last month. On Friday 23 June the A Index was 82.6 c/lb. One month later on 21 July the A Index was back up at 85.05 c/lb. This is nearly 1% above the A Index on 21 July 2016.

• The international cotton market in this interim period before the Northern Hemisphere harvest of the 2017/18 crop is shaping up in a similar way to the previous two seasons. Little spot cotton available from Northern Hemisphere harvests, while Australian and Brazilian supplies now starting to come onto the market are well sold forward or there are logistic constraints.

• The result is international prices that move up and down within a narrow band depending on the key news of the day. As estimates of the Australian current crop decline cotton prices move up. Prices also receive support each week from additional US export sales that pile up on already large volumes of commitments for the first half of 2017/18. The announcement by the Cotton Corporation of India that it will be buying in the domestic market regardless of the Minimum Support Price (MSP) adds confusion to the outlook but, on balance, is positive for prices.

• On the other hand, the underlying message in the market is that global production for 2017/18 is around 25 Mt and stocks outside of China look set to rise by 1.6 Mt to 10.7 Mt or 62% of consumption. A larger and better than expected current crop in Brazil is leading to lower domestic prices but no impact yet on international prices since any uncommitted volumes will take at least two months to reach export markets.

Tight supplies for nearby shipment offer support to cotton prices at the end of the 2016/17 season The Cotlook A Index (FE) still near 85 c/lb Other cotton prices are holding up

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India Shankar (S-6) China Cotton Index (3128B) Cotlook A Index (FE)

Source: Cotton Outlook, Cotton Association of India, www.chinacotton.org. Monthly data to 21 July 2017

International Cotton Prices

http://www.chinacotton.org/



Cotton

• Currently this season’s A Index is about 5.5 c/lb higher than the forward index. At the end of July the current A Index switches to the forward index as the 2017/18 season starts. Normally there is a dip in price at the switch between seasons but this time prices could turn up quickly since little will change between the end of July and the start of August. There may even be pressure from additional import requirements from India since the timing of their new crop is still uncertain.

• In India domestic prices (Shankar-6) fell in the last month in both domestic and USD. Shankar-6 fell from RPS12,007/Quintal (84.43 c/lb) on 23 June to RPS11,810 (83.32 c/lb) on 21 July.

• In China domestic prices fell through the last month from RMB15,966/t (106 c/lb) on 23 June to RMB15,902 (106.66 c/lb) on 21 July. Most spinners are now dependent on reserve auction sales since current season cotton is depleted. Any imported or Xinjiang cotton on offer through the reserve has found buyers but reserve cotton from other provinces has been harder to sell. Quality concerns are emerging even for Xinjiang cotton offered from the reserve.

• In total over 2 Mt have been sold since March. Reserve sales should conclude at the end of August and if this is the case there will be pressure on domestic prices to rise since there are few other sources of cotton. However there is already talk in the market that reserve sales will be extended as happened in 2016. In that case spinners will have plenty of time to stock up until the new crop comes to market.

Emerging weather concerns cast a shadow on the outlook for production next season Sales at Chinese reserve exceed 2.0 Mt Production forecast up at largest cotton producers

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China India Other USA Brazil Australia Pakistan

World cotton production by largest producers

Source: USDA, FS, July 2017

2017/18f

2015/16 2016/17e



Wool

• Wool prices fell in that last week of the 2016/17 season (week of 29 June) to 1,507 Ac/kg clean (1,157 c/kg) from 1,533 Ac/kg clean (1,156 c/kg) the previous week but were up strongly on the previous month. In the week of 25 May the EMI was 1,495 Ac/kg clean (1,116 c/kg). Buyers were aware of the large volume of wool on offer for the first two weeks of July so did not chase prices up.

• At the end of the 2016/17 Australian wool season the EMI was up +16% in AUD (up +20% in USD) compared with the end of the 2015/16 season. Wool volumes offered at auction were up +5% on the previous season which is similar to the volume of wool tested by the Australian Wool Testing Authority (AWTA). AWTA data shows a slight broadening of the wool clip since wool tested in the 19.5 micron and under range was -1% lower than the previous season.

• The 2017/18 season started with two sale weeks through to 13 July and a rebasing of the EMI. A review of the EMI usually takes place every three seasons to adjust the indicator for changes in the micron composition of the clip. In this review the EMI was rebased higher. This would put the EMI at the end of 2016/17 at 1,525 Ac/kg clean compared with 1,507 Ac/kg clean in the old EMI.

• Wool prices fell only a little in the first two weeks of the new season to 1,522 Ac/kg clean (1,176 c/kg) in the week of 13 July. This is an excellent result given high volumes on offer and a stronger Australian currency. While buyers were looking to stock up for the three week recess at Australian auction, underlying demand remains good even at these high price levels. Auction sales start again the week of 7 August.

Strong end to the 2016/17 season for Australian wool prices

Prices hold firm despite large offer Australian EMI rebased up +18 Ac/kg clean

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Source: AWEX, FT, Bank of England. Weekly data to 21 July 2017

Wool Price: Australian Eastern Market Indicator (EMI)

Micron price indicators at the start of each season (1st week of July)

0250500750

1,0001,2501,5001,7502,0002,250

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USc/kg clean Australian c/kg clean



Sustainability and Biofibres

• The different natural, artificial and synthetic fibres used in textiles, for both consumer and industrial applications, have all attracted censure from NGOs and other environmental bodies. Their criticism embraces (i) exploitation of finite resources, (ii) potential pollution from toxic process chemicals and waste products, and (iii) the complex logistics of a supply pipeline that can have serious environmental and social impact, particularly in emerging markets. The need to achieve a circular economy by recycling used textiles is also attracting growing attention.

• Viscose has scored highly in many life cycle analyses, largely because it is made from a sustainable resource (wood or cotton linter), and it is biodegradable. The viscose process has, however, drawn criticism because of the chemicals used and the noxious by-products produced, notably hydrogen sulphide (H2S) and other sulphurous derivatives. H2S is a readily detectable, foul smelling, toxic and flammable gas. Modern process safety management techniques can mitigate these issues and contain or even derive value from the co-products. But there are plants which do not adhere to best-in-class standards and pollution is still an issue in some regions.

• Concerns regarding the environmental impact of the viscose process led to plant closures in the 1970s in the US and Europe. This triggered a search for alternative solvents for cellulose to produce a dope from which a cellulose fibre could be spun. This led to identifying n-methylmorpholine-n-oxide (NMMO) as a suitable solvent and the development of the solvent spun lyocell process. Lyocell was initially viewed as an environmentally friendly alternative to viscose but it has since been established as a unique fibre with its own specific performance profile.

This month we focus on the growth of lyocell cellulosic staple fibre

Viscose scores on sustainability … … but lyocell is judged more environmentally friendly • Courtaulds established a pilot plant in the early 1980s. By the mid-

1980s a semi-commercial production was operating at the Grimsby (UK) site. Courtaulds first commercial plant was in Mobile (US), which came on-stream in 1992. Lenzing’s work on lyocell stemmed from a 1987 licensing deal with Akzo, and commercial production began in 1997 at Heiligenkreuz (Austria). Subsequently Lenzing acquired Courtaulds’ plants, and has steadily expanded lyocell (branded Tencel by Lenzing) capacity at its sites in Austria, UK and US, matching the growth in demand.

• Lenzing’s Tencel capacity was 130ktpa in 2010 and has reached 236ktpa in 2017, with a new plant in Austria and capacity additions at its other plants. In addition, Chinese companies, notably Xingxiang Bailu, have initiated lyocell production. Grasim Industries, an Aditya Birla subsidiary, also has a small lyocell capacity in India. This has helped push total global lyocell capacity to some 300ktpa, and as Lenzing is set to add new mills in the US (90ktpa in 2019) and Thailand (100ktpa in 2020), global capacity could reach 500ktpa by 2020.

• As the following graph shows, the global trade in lyocell staple has increased steadily, particularly in recent years. Much of the lyocell produced in Austria is exported, largely to China (nearly 50% of lyocell exports in the last two years). Other major destinations include India and Turkey. The bulk of UK exports are destined for China (66%) and East Asian markets. Much of the US output is, however, consumed locally. Chinese producers have only recently acquired lyocell technology and are still learning how to manage the process so there are still some concerns about the quality of this fibre.




• Lenzing is stressing lyocell’s environmental credentials by highlighting the process and the biodegradable fibre. It has also successfully submitted to an audit from Canopy, an NGO concerned with protecting endangered woodlands. Lenzing was able to demonstrate, using the risk-based approach from Canopy and the Rainforest Alliance, that the wood used to produce the DWP feedstock for Tencel (and VSF) is not sourced from endangered woodlands. The Aditya Birla Group has also successfully submitted to an audit of its VSF chain.

• Lenzing has also taken the first steps in developing a circular economy concept for its lyocell by using greige cotton fabric offcuts as part (reportedly 10%) of the high purity cellulose feedstock for production of a Tencel grade it has branded Refibra. Currently, just 500t of post-industrial textile waste is being used but hopes to raise this to 3kt in a few years time.

Producers work on lyocell environmental credentials Other cellulosic developments • There has recently been growing interest, particularly in Scandinavia,

exploring opportunities created by a new class of cellulose solvent. These “ionic solvents”, based on imidazolium salts, exhibit high stability, low volatility (eliminating the need to recover volatile solvent) and low toxicity. Uses being explored include recovering cellulose from fabrics made from cellulosic fibres and blends with polyester fibre. Extracting cellulosic fibres directly from biomass is another possibility. The downside is the current high price of these ionic solvents.

• A different approach has been taken by the Finnish company Spinnova, a spin-off from the Finish VTT Technical Research Centre. This exploits technology developed at VTT to extract and extrude cellulosic fibres from a suspension of cellulose fibres, namely pulp slurry. This environmentally friendly process omits the chemical process used in the viscose (or cuprammonium) process to produce a regenerated cellulose fibre. Lenzing has taken a stake in Spinnova. In early July it was announced that the Brazilian paper pulp producer Fibria has also invested €5mn ($5.7mn) to take an 18% stake in the company.

• Meanwhile, another Finnish company KaiCell has revealed its Arbron process, although details of this process have not been revealed so far. This produces a cellulose feedstock that can be used by viscose plants to produce an environmentally friendly cellulosic fibre using a sulphur-free, water-based process. KaiCell has recently signed an agreement with the Chinese VSF producer CHTC regarding the construction of NBSK pulp mill in Finland. The bulk of the mill’s production will initially be market paper grade pulp but a growing proportion of this pulp will be used for the production of the novel Arbron feedstock.

Lyocell shown to use sustainable wood; and other routes to cellulosic fibres are being developed

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Global imports of lyocell from producing countries

Source: GTT




Regenerated nylon and recycled polyester • Aquafil the Italian PA6 producer has developed technology to

depolymerise post-consumer waste and recover caprolactam from which high quality regenerated PA6 yarn is produced, branded Econyl. This route enables Aquafil to reduce problems in recovered fibres related to contaminating dyes and additives such as TiO2. As a result, they can produce white fibre from black carpets or green fishing nets. Aquafil uses discarded nylon fishing nets and lines and is now investing in a new carpet recovery route in North America. It should be noted that regenerated nylon is competing in a differentiated market, where performance is appreciated and brands can be built on the value recognised by not using virgin resources. These regenerated fibres are not competing for virgin business on price but on value. Econyl fibres are being used in carpets and in swimwear, applications where producers use the low environmental impact of regenerated fibre in their marketing efforts. Numerous swimwear producers already use Econyl yarn, joined recently by two UK brands, Sober & Naked and Finisterre and a US brand, Manakai Swimwear.

• TWD Fibres produces polyester textile filament (Diolen) and PA66 textile filament (Timbrelle) in Deggendorf (Germany), and places considerable importance on sustainability with regard to the products it supplies. The company recently launched its Diolen®ReCIRCLE polyester filament made from recovered waste plastic bottles: 48 1.5l PET bottles are said to be used to produce 1kg of this recovered yarn.

• Advansa, (Germany), produces short-cut polyester fibres using polymer from traceable post consumer PET bottle waste to ensure high quality fibres. This product, used in bedding and wallpaper, was recently certified by the US FDA as safe for food contact.

Apparel brands with fibres from recovered polymer • A new filament with a unique value proposition has been born out of the

cooperation of three Spanish leading firms: Ecoalf, which uses fabrics made from recycled materials, Antex, a producer of yarn with plants in Spain, Brazil and Mexico and Textil Santanderina, Spain’s largest weaver, with a broad range of yarns and fabrics. Seaqual, the brand name used for their new polymer, is a 100% recycled polyester filament including recycled bottles collected in the seabed. Ecoalf, Antex and Textile Santanderina have now formed a joint venture, Seaqual 4U, to push this project forward. The project was started several months ago by Javier Goyeneche (founder of Ecoalf, 2009), as Upcycling the Oceans, and hits the ground running with the partnership of complementary companies and the cooperation of some 1500 Spanish fishermen who deliver the bottles tangled in their fishnets for separation and recycling. The collected bottles are recycled by Antex to produce polyester Seaqual filament yarn, and the fabric produced by Textil Santanderina with this Seaqual yarn is used in the production of Ecoalf’s branded clothing. They hope to support a massive transformation to help clean the oceans and are calling on all concerned parties to join the movement. Other recycled materials used in the manufacture of Ecoalf’s range of clothing, footwear and accessories include recycled rubber from discarded tyres, recycled post-industrial cotton and wool waste, and coffee grounds.

The circular economy concept is also being applied to synthetic fibres



Price Comparisons

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70

60

0 Jul-17 Jan-17 Jul-16 Jan-16 Jul-15 Jan-15

Inde

x Ju

l 201

3 =

100

Asia PCI Fibres Index 1.4 den staple 150 POY

C Asia PCI Fibres Index vs Polyester

92

94

96

98

100

102

104

106

108

110

1/7/

2016

1/4/

2016

1/1/

2016

1/10

/201

5

1/7/

2015

1/7/

2017

1/4/

2017

1/1/

2017

1/10

/201

6

1/4/

2015

1/1/

2015

1/10

/201

4

1/7/

2014

1/4/

2014

1/1/

2014

1/10

/201

3

1/7/

2013

Inde

x 07

/01/

2011

= 1

00

D Selected Keqiao Fabric Indices (Price)

Polyester fabric Polyester/cotton fabric Cotton fabric



Price Comparisons Polyester Price Tendencies

• Crude prices strengthened during July, with Brent seesawing upwards towards $50/bbl,. This has been supported by the third consecutive weekly draw in US crude stocks following lower crude imports to the US. The market has interpreted this as a potential sign that the rebalancing efforts of OPEC are beginning to bite. Once again we forecast oil to rise gradually to add $4-5/bbl by Q4 2017 then drop by about the same into Q2 2018, as supplies become more abundant.

• Polyester chip prices are expected to remain quite stable in China and fibre prices may fall back after recent rises. In the US yarn prices are expected to recover recent losses in the short term. In Europe stable prices may be disrupted by currency if euro weakens.

• Structural changes that may drive prices off this relatively stable path include the growing number of calls for defensive trade measures to protect local industries. Price inflation can be a result of losing access to competitively priced global commodities.

Chip POY Staple POY POY POY Staple Staple StapleChina China China Asia/FE USA W Eur Asia/FE USA W EurRMB/t RMB/t RMB/t $/kg $/kg €/kg $/kg $/kg €/kg

June 5913 6525 6675 0.96 2.11 1.37 0.91 1.85 1.41July 6138 7100 6975 0.99 2.11 1.36 0.93 1.85 1.41August 6180 7000 6950 0.99 2.11 1.36 0.94 1.85 1.41September 6175 6875 6850 0.96 2.06 1.36 0.93 1.80 1.41October 6263 7350 7050 1.00 2.06 1.36 0.95 1.80 1.41November 6488 7800 7300 1.05 2.06 1.37 0.98 1.80 1.42December 7275 8800 8525 1.15 2.11 1.38 1.04 1.85 1.42Jan-17 7663 8600 8275 1.12 2.19 1.43 1.01 1.93 1.47February 7838 8950 8925 1.16 2.19 1.49 1.06 1.95 1.53March 7300 7950 7925 1.09 2.24 1.53 1.01 1.95 1.57April 7088 8100 7725 1.08 2.19 1.49 0.99 1.90 1.53May 6675 7400 7525 1.05 2.19 1.49 0.96 1.87 1.53June 6638 7750 7575 1.07 2.18 1.47 0.97 1.84 1.49July 7000 8300 8200 1.12 2.18 1.47 1.03 1.84 1.49TendenciesAugust 6967 8182 8128 1.09 2.21 1.45 1.01 1.87 1.48September 6969 8064 8010 1.09 2.24 1.44 1.01 1.90 1.47October 7065 8043 8044 1.10 2.26 1.43 1.02 1.91 1.46November 7114 8095 8093 1.10 2.26 1.42 1.03 1.92 1.47December 7022 7999 8004 1.09 2.26 1.41 1.02 1.92 1.46Jan-18 7121 8117 8125 1.09 2.26 1.47 1.01 1.91 1.49February 7076 8069 8082 1.08 2.26 1.47 1.01 1.91 1.52March 7030 8022 8038 1.08 2.26 1.46 1.00 1.91 1.51April 6985 7975 7995 1.07 2.26 1.46 1.00 1.91 1.51



Price Comparisons Price Tendencies

F China Polyester Staple (1.4 denier) E China Polyester POY (resultant 150f96)

0

4,000

8,000

12,000

RMB/t

Jul-17

Jan-17

Jul-16

Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

Jul-13

Jan-18

0

4,000

8,000

12,000

RMB/t

Jan-17

Jul-16

Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

Jul-13

Jan-18

Jul-17

H Regional Polyester Staple Prices (1.4 denier) G Regional Polyester POY Prices (resultant 150f96)

0.60.81.01.21.41.61.82.02.22.42.62.8

0.60.81.01.21.41.61.82.02.22.42.62.8

€/kg $/kg

Jan-18

Jul-17

Jan-17

Jul-16

Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

Jul-13

0.5

1.0

1.5

2.0

2.5

3.0

0.60.81.01.21.41.61.82.02.22.42.62.8

€/kg

Jan-14

Jul-13

$/kg

Jan-18

Jul-17

Jan-17

Jul-16

Jan-16

Jul-15

Jan-15

Jul-14

Europe (RHS) USA Asia Europe (RHS) USA Asia

Fibre Chip POY Fibre Chip Staple



Price Comparisons

0200400600800

1,0001,2001,4001,6001,8002,0002,2002,4002,600

Jan-17 Jul-16 Jan-16 Jul-15 Jan-15 Jul-14 Jan-14 Jul-13 Jan-13 Jul-12 Jul-17

$/t

Oil Propylene (spot) CPL (contract) 250

500

750

1,000

1,250

1,500

1,750


$/t

50

100

150

200

250


c/kg

0

100

200

300

400

Jul-16 Jan-16 Jul-15 Jan-15 Jul-14 Jan-14 Jul-13 Jan-13 Jul-12 Jan-17 Jul-17

c/kg

PET Chip MEG (contract) PTA

Viscose Staple

Cotton A Index (FE)

PSF

NTF (70 den) PTF (150 den POY)

Polyester Raw Materials Prices (Asia)

Filament Yarn Prices (Asia) Staple Fibre Prices (Asia)

Asian spot Propylene & Caprolactam and Oil (OPEC)prices



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