2022 market review     Price rose at first but decreased later Macro economy was pressed by deteriorating external environment and adjusting inner policies in 2022, with various complex factors including Russia-Ukraine conflict, soaring energy price, repeated spread of pandemic and high inflation. The cost and demand for chemicals were impacted.  PFY market were under pressure amid high cost, increasing supply and inadequate demand throughout 2022. Price of PFY was high in the middle of the year but was low at the beginning and at the end of year. According to the data from CCFGroup, price of semi-dull POY150D/48F, FDY150D/96F and DTY150D/48F was at 7,150yuan/mt, 7,400yuan/mt, and 8,725yuan/mt respectively at the beginning of year, increased to yearly high in June at 9,390yuan/mt, 9,700yuan/mt and 10,460yuan/mt respectively, up by 31%, 31% and 20% respectively, but was in downward correction in the second half of year and hit yearly new lows after end-October, which was at  6,820yuan/mt, 7,510yuan/mt and 7,870yuan/mt respectively in end-November, down by 2,570yuan/mt, 2,190yuan/mt and 2,590yuan/mt or 27%, 23% and 25% respectively from high level.   Prices of PFY was in upward consolidation in the first quarter of 2022. Increasing PFY price was mainly stimulated by rising crude oil price.  The operating rate of PFY plants and downstream plants was not high near the Spring Festival holiday with weaker supply and demand. Inventory of PFY apparently increased after the Spring Festival holiday. PFY companies faced some selling pressure. PFY price was more apparently affected by the advancing cost. Price of crude oil moved up impacted by geopolitical conflict and the sanction on Russia, ending up with ascending polyester polymerization cost. PFY price followed the uptrend.   In the second quarter, prices of PFY decreased at first but rose later. From late-March to early-April, demand for PFY and end-user products chased up insufficiently with high cost and stunted transportation amid worse spread of pandemic. Downstream plants slashed run rate near the Tomb-sweeping Festival. Price of crude oil fell from high level when the expectation of worldwide economic growth weakened. As a result, the polyester feedstock cost also dropped. Price of PFY decreased with high inventory.  From April to early-June, when the European Union reached an oil ban on Russia and the summer travel peak was expected to appear, oil prices soared again. PX price surged driven by the consumption of oil. Polymerization cost increased, pushing up price of PFY, but the increment of PFY was smaller than that of cost.   In the third quarter, price of PFY was in upward correction after declined at first. From late-June to mid-July, many national banks raised the interest rate. As a result, the investors worried the recession of demand and economy. Price of domestic commodity and oil weakened. End-user demand for PFY was hard to chase up. The operating rate of PFY plants was low and the inventory of PFY was high. With falling cost and excessive supply, price of PFY rapidly decreased. Price of PFY was in range bound from mid-July to mid-September. Although the crude oil price kept falling, supply of PX remained tight and PTA enjoyed cost support. That meant PFY price had cost support. As for demand, the operating rate of downstream plants was low during the dull season and the periodical power rationing. The inventory of PFY sustained high.   In the fourth quarter, price of PFY rapidly fell and turned to be hemmed into a tight range. From October, the spread of pandemic worsened again in many regions of China and the peak-season consumption was worse than anticipated. Some downstream plants started holiday from November. Comprehensive demand for PFY was insufficient. Price of crude oil was in weak correction. New polyester feedstock units intensively started operation. The cost of PFY weakened. PFY companies were active in destocking at the end of year. The price competition was fierce. PFY price quickly fell. PFY companies saw the highest losses in November. Thereafter, price of PFY shivered at low level with weaker supply and demand.   Greatly falling market sentiment  Weaker supply and demand   According to the data from the CCFGroup, the capacity of PFY was estimated to be 46.57 million tons/year by the end of 2021. New net capacity increase was at 1.26 million tons/year in 2022, including 1.14 million tons of direct-spun PFY capacity and 0.12 million tons/year of chip-spun PFY. PFY capacity was expected to rise by 2.7% to 47.83 million tons/year in 2022, with falling growth rate. Among this, new PFY capacity was expected to be 3.06 million tons/year in 2022, with growth rate at 6.6%. 1.55 million tons/year of capacity was adjusted down. After eliminated 0.25 million tons/year of capacity, the total decrement may be at 1.8 million tons/year, down by 3.9%.   The production of PFY was estimated at 33.05 million tons in 2022, down by around 6% on annual basis, hitting historic new low. The comprehensive operating rate of PFY plants was at 70.02% in 2022 (based on operating rate=production/the average of capacity at the beginning of year and the end of year), down by 9% on annual basis. Operating rate of PFY plants in 2022 was far lower than that in 2020 and 2021 and far lower than the five-year average in 2017-2021. Except for being moderate in February-March, the run rate was largely low, especially in November-December. The operating rate was moderate in the first quarter but was weak from the second quarter to the fourth quarter.   The demand for textiles and apparels was impacted by the repeat of pandemic spread in local China, falling demand for the real estate industry and high feedstock price in 2022. Textile and apparels producers were eager to destock. Coupled with reducing overseas demand amid high inflation pressure, domestic demand and export of textiles and apparels weakened. Therefore, the operating rate of DTY plants and fabric mills remained low in history in 2022. Inventory piled up The inventory of direct-spun PFY was high in history in 2022. The inventory piled up and the increase was mainly in the first quarter. The inventory of direct-spun PFY plants was in upward correction from the second half of 2021, until the first quarter of 2022, and remained high from the second to the fourth quarter of 2022. By December, stocks of PFY apparently decreased with low operating rate of PFY plants and moderate downstream speculative demand.   Profit hit historic low In long run, the profit of PFY plants hit multi-year lowest in 2022. Therefore, plants were active in lowering expenditure by reducing the workers' wage and increasing the holiday for managerial staff.  The cash flow of PFY was volatile throughout 2022.       The cash flow of POY and FDY increased in January-February, declined in March-April, rose in May-August and fell in September-November and rise in December. Three ups and two downs of cash flow were mainly accompanied by the change of mindset among PFY companies. Falling cash flow was mainly accompanied by the active destocking in PFY plants and low-priced competition for sales, mainly in March-April and September-November. The reasons for improving profit in January-February and May-August had some similarities and differences. Low operating rate was the main similarity. PFY companies expected inventory to appreciate in January-February with rising cost and some actively built up inventory. The cash flow was very low in end-April amid disordered competition but recovered in May-August when companies kept running at low capacity. In December, stocks of PFY slumped amid low operating rate of plants and moderate speculative demand. PFY plants raised price to see lower losses.   The startup of new units delayed In 2022, around 2 million tons/year of direct-spun PFY capacity is delayed into 2023.