China's polyester staple fiber prices soaring on robust demand

Polyester staple fiber prices in China have surged by up to 19 percent since the beginning of this year as persistent rise of cotton prices all around the world has boosted demand for the other fiber products to replace cotton.

Industry insiders expect a further price hike of polyester staple fiber given widening gap between supply and demand, adding that the industry has stepped into a periodic climate rise and related listing firms will benefit from it.

Domestic listing companies engaged in polyester staple fiber production include Jiangsu Huaxicun Co. (000936.SZ), Xiake Color Spinning Co. (002015.SZ) and Sinopec (NYSE:SNP) Yizheng Chemical Fiber Co. (600871.SH).

As textile enterprises resume production successively after week-long Spring Festival holiday (February 2 to 8), demand for cotton substitutes has been rising significantly.

Data from www.textnet.com, a textile information provider, show that by February 11, prices of polyester staple fiber had come to 14,900 yuan/metric ton (tonne), up 4.19 percent over the end of January and 19 percent over December 31.

Pressured by sharp rise of cotton prices in 2010, many textile firms have changed their proportion of raw materials to reduce cost and this has stimulated demand for polyester staple fiber.

Despite price hike of polyester staple fiber, many large textile enterprises are still stepping up purchases to fulfill orders in traditional consumption peak season after Spring Festival.

Meanwhile, before new cotton enters the market in autumn, international cotton prices are expected to hold at high levels. Global cotton stock to consumption ratio in crop year of 2010/11 dropped to 37 percent compared with 50-55 percent in the previous two crop years.

Currently, prices of polyester staple fiber are still 4,300 yuan/tonne lower than cotton and still have big room to rise.

Since this year's beginning, price of PTA, a major feedstock for polyester staple fiber production, also embraced a sharp rise.

By February 11, PTA prices had reached 11,800 yuan/tonne, a jump of 19 percent over the end of last year.

Yang Ruomu, an analyst with Dongxing Securities, noted that PTA industry will be in the prosperity period in the following two years. PTA supply may fall short of demand by 4 million tonnes in 2011 and such a gap is unable to be filled in short term in consideration of long span of preparation for PTA production projects as well as high threshold for investments in the industry, Yang added.