Status quo of chemical fiber industry in 2017 and forecast of 2018

With the promotion of structural reforms on the supply side， the chemical fiber industry will continue to operate steadily in 2017 and lead the way in quality and efficiency. The chemical fiber industry accelerated the elimination of the outdated as well as mergers and reorganizations. With a limited increase in total volume， the industrial concentration was further increased. The overall operating rate of the industry was further increased compared to 2015 and 2016. Inventory remained low， and product prices climbed up oscillatorily under the support of raw material costs. The performance of the industry has improved significantly， and the benefits have increased greatly.

Operation of chemical fiber industry in 2017

Production

According to statistics from the National Bureau of Statistics， in 2017， the output of chemical fiber was 49.1955 million tons， an increase of 4.97% year-on-year （Table 1）. The output of polyester was 39.3426 million tons， an increase of 4.84% year on year； the nylon production was 3.3292 million tons， a year-on-year growth of 8.83%； the output of viscose staple fiber was 3.638 million tons， rising 3.68% year on year.

In 2017， the overall operating rate of the chemical fiber industry further increased over the previous year. In particular， the polyester industry improved significantly. The average operating rate of polyester filament was around 78%. The operating rate of the nylon industry continued to increase during the year， but the average operating rate for the year was still relatively low， at around 70%. The viscose staple fiber industry was affected by the environmental protection policy and the operating rate declined slightly， while the viscose filament industry enjoyed a high rate of 95%. Spandex industry witnessed larger fluctuations due to supply and demand changes， environmental protection policies and other issue. The acrylic fiber industry suffered a loss due to the high price of raw material acrylonitrile， which led to a significant reduction in industry load.

Price

In 2017， the recovery of the global economy and the steady growth of Chinas economy led to the growth in the demand for chemical fiber products. The structural reforms on the supply side have promoted the improvement of the structural contradictions in the industry. The rise in international oil prices has played a supporting role in the cost of the chemical fiber industry. On the above multiple factors， the prices of major products have risen to varying degrees. Judging from the price trend of chemical fiber products， the overall prices showed a fall-rise trend， and the synthetic fiber market was closely related to the trend of international oil prices.

Inventory

In 2017， the inventory of major chemical fiber products increased first and then decreased. At the beginning of the year， the prices of chemical fiber products continued an upward trend in the fourth quarter of 2016， leading to the gradual accumulation of inventory. After April， the industry entered the destocking phase and the inventory gradually fell to low levels； at the same time， the prices continued to rise， and the companies obtained good results. Driven by the benefits， the enterprises kept running highly loaded， resulted in somewhat inventory increase again in the fourth quarter.

Imports and exports

In 2017， a total of 916，800 tons of chemical fiber was imported， an increase of 100，000 tons from 2016， up 13.11%. Among them， the import volume of viscose staple fiber was the largest， reaching 207，400 tons， an increase of 5.68% year on year， which was related to the late start of domestic industrial production of lyocell fiber and lower production； the polyester staple fiber saw the largest growth by 29% because of the reduction in imports of solid waste and the decline in the output of recycled spinning； the import volume of other fibers also increased in different degrees. On the one hand， it shows that China still has a certain amount of demand for imported fiber products. On the other hand， it also indicates that the domestic market has rebounded， enjoying increased demand （Table 2）.

In 2017， Chinas export of chemical fiber products exceeded 4 million tons， accounting for 8.13% of the output （Table 3）. The export products are still dominated by polyester filaments and polyester staple fibers， which account for 50.47% and 25.15% of the total export volume respectively. The export volume of acrylic fiber has increased by as much as 51.83%， for the reason that， besides the small base number， the enterprises intensified product development and strove to expand the international market. In 2017， the value of chemical fiber exports increased by 13.51%， which was 10.48 percentage points higher than the increase in volume， and the average export price increased by 10.17% year on year.

The decrease in the volume of exports may be due to a combination of factors. On the one hand， the protectionism of international trade represented by the United States and India has risen， and trade barriers have increased. On the other hand， the domestic market is better than the international market， affecting the export enthusiasm of enterprises. Whether it is related to the increase in the operating rate of international chemical fiber manufacturers has yet to be further verified.

Investment

In 2017， the chemical fiber industry actually completed a fixed asset investment of 133 billion RMB， a year-on-year growth of 19.2% and an increase of 18.86 percentage points over 2016 （Table 4）， reversing the declining trend since 2011， especially in the polyester industry and man-made fibers which were as high as 54.49% and 27.79% respectively. It is learned that in the next two years， new orders for polyester filament equipment have reached historical high levels， and there will be a large number of newly added production projects for viscose staple fibers. When the structural reform of the chemical fiber industry has just achieved initial results， the controlled production capacity will be released reasonably， which will still be an issue that the industry needs to take seriously.

Performance

According to data from the National Bureau of Statistics （Table 5）， in 2017， the chemical fiber industry completed its main business income of 790.582 billion RMB， a year-on-year increase of 15.69%， and a total profit of 44.495 billion RMB， an increase of 38.30% year on year， and a rising of 18.44 percentage points over 2016. It is the fastest growing industry in the textile sub-sectors， which contributes 50.5% to the increase in profit of the textile industry. The industry suffered a loss of 13.02%， a year-on-year decrease of 3.25 percentage points， and the losses of loss-making enterprises also decreased by 41.29% year on year.

In the sub-industry， the polyester industry realized a total profit of 20.56 billion RMB， a substantial increase of 63.40% year on year， which contributed 46.20% of the profits of the chemical fiber industry. However， since its output ratio accounts for more than 80%， the profit rate per unit product is still relatively low， therefore， it is necessary to further increase the added value of products. Man-made fiber industry saw profit of 13.618 billion RMB， an increase of 17.11%， but the loss of loss-making enterprises has increased significantly by 78.77%， indicating the profitability differentiation， which has something to do with various environmental protection policy implementation standards. The acrylic fiber industry was generally at the edge of profit and loss， while some enterprises suffered more losses， and the loss of loss-making enterprises has increased by 139.78% year on year.

In 2017， the performance of the chemical fiber industry was significantly improved. The interestearning multiples have been increased by 1.06 year on year， which means that the debt paying ability has improved， and the turnover efficiency of accounts receivable， current assets and total assets has enhanced. The main business profit margin reached 5.63%， an increase of 0.92 percentage point over the same period. The main business growth rate and the increase in total asset growth rate reflect the sound development and growth of the industry.

The chemical fiber industry entered the adjustment cycle in 2012， and the profit margin has dropped to a low level. This gives the industry an opportunity to slow down for introspection. The industry continues to promote structural adjustment and industrial upgrading， and builds core competitiveness. The profit margin has gradually increased since 2012； however， the recovery of profitability will promote the industrys enthusiasm for fixed asset investment. This has already become apparent in 2017. To control the reasonable growth of production capacity and continue to adjust the industrial structure will remain the key to the future development of the industry.

Forecast of 2018

Industry operation background

The global economy is undergoing a cyclical recovery， and multilateral agencies generally believe that this cyclical recovery will continue in 2018. The report of the UN “World Economic Situation and Prospects in 2018” pointed out that the global economic growth rate in 2017 reached 3%， which has been the fastest growth since 2011. It is expected that the global economic growth in 2018 and 2019 will also stabilize at around 3%. The IMF is more optimistic about global economic judgments. After experiencing a seven-year recovery period， the global economy is finally expected to transit to a boom period in 2018. It is expected that the economic growth rate will increase by 3.7% year-on-year and 0.1 percentage point faster than in 2017.

The year 2018 marks the beginning of implementation of the partys 19th National Congress and the 40th anniversary of reform and opening up， and it is a crucial year for success in building a well-to-do society and implementing the 13th Five-Year Program. Chinas economy has entered a new era of high-quality development. Chinas GDP growth in 2017 reached 6.9%， marking the first time in six years that the annual growth rate was accelerating and contributed about one-third of the global economic growth. Driven by strong domestic demand and loose macroeconomic policies， Chinas economic growth rate is expected to remain stable in 2018.

As the global economy continues to recover and consumer confidence improves， the overall demand for textile consumption will grow steadily， but the growth rate will not increase significantly. The continued appreciation of the renminbi will cause some pressure on textile and apparel exports. The steady growth of the national economy and the rapid increase in residents income will provide a healthy environment for domestic consumption. The intelligence and machine substitutions further offset the adverse effects of rising labor costs. Coupled with the improvement of quality， the international competitiveness of the textile industry continues to recover.

In terms of crude oil， although OPEC has been making efforts to reduce oil output in order to increase oil prices， shale oil production in the United States continues to increase and the two sides have fiercely contested. In 2018， the increase in U.S. crude oil production will continue to contend with OPECs reduction in output and increase in demand. Under the background of rising oil prices， the implementation rate of OPECs reduced production may decline， and it may even gradually withdraw from the production cuts. Therefore， in 2018， the balance of crude oil supply and demand pressure will increase. However， the geopolitical risks have increased the uncertainty in the crude oil market. In 2018， there are still many hidden troubles in supply disruption， which form a strong support role for oil prices.

In 2018， the environmental protection situation is still severe. Pollution prevention and control is one of the three major challenges in building a well-off society. The impact of environmental protection on the chemical fiber industry will， on the one hand， promote the acceleration of the elimination of backward production capacity. On the other hand， it may lead to the increase of some auxiliary materials and raw materials， resulting in rising costs. Prohibiting the import of foreign waste may continue to increase the raw material gap in the recycling industry.

Operation prediction

In 2018， demand is expected to grow steadily. Crude oil may be the most important factor affecting chemical fiber prices in the future. Environmental protection is a potential factor affecting the viscose fiber market. The substantial increase in industry profits in 2017 is certainly a reflection of industrial restructuring and enhancement of product development. However， the rise in crude oil prices has driven up the price of inventory products and has contributed a lot to the benefits of the chemical fiber industry.

The crude oil market in 2018 is unlikely to rise steadily as in 2017. It is expected that the volatility will increase. If there is no geopolitical interference， the possibility of a downward oscillation may not be ruled out. In addition， the pressure from the new production capacity of the polyester polyester and viscose staple fiber industries will rebound， and the supply and demand structure will weaken. With the release of the shutdown unit and the release of new capacity， PTA has relaxed its supply compared to 2017. With the increase in investment， there is concern about how long the good conditions in the chemical fiber industry can be maintained. It is estimated that by 2018， the growth rate of chemical fiber production will be around 5%. The export volume will further expand and the industry benefit will continue to grow. However， due to the base number and market conditions， the growth rate will drop significantly.