Since 2021, commodity markets have continued to strengthen on the back of recovering demand and inflation expectations. Meanwhile, the OPEC continues to cut production to keep a tight grip on crude supplies. As a result, international oil prices continued to rise from January to June, with WTI crude oil prices rising from around USD 50/barrel at the beginning of the year to over USD 70/barrel in June, surpassing pre-COVID-19 levels (Figure 2).
3. Chemical fiber exports increased substantially
With the recovery of global trade demand, the export volume of chemical fiber products increased sharply from January to June. On the one hand, this is due to the low base effect in the same period last year. On the other hand, the demand in the international market has indeed increased. As the pandemic is out of control in Southeast Asian countries such as India, Vietnam and Myanmar, some orders have been returned to China. According to Chinese Customs statistics, from January to June, the export volume of main chemical fiber products such as polyester filament, polyester staple fiber, nylon filament and spandex increased significantly year-on-year, and exceeded the data of the same period in 2019 before the pandemic (Table 1).
4. Steady recovery in end-market
Since 2021, the steady improvement of China’s national economy has driven the steady recovery of the domestic market for textile and apparel. According to the data of the National Bureau of Statistics, from January to June, the sales of garments, shoes, hats, and knitting textiles above designated size increased by 33.7 percent year-on-year, with an average growth of 3.7 percent in two years. China’s online retail sales grew by 24.1 percent year-on-year, 27 percentage points higher than the same period in 2020, with an average growth of 9.8 percent in two years.
In terms of export, the data of China Customs Express show that the total export amount of China’s textiles and apparel from January to June was USD 140.09 billion, with a year-on-year growth of 12.1 percent and an average growth of 6.2 percent in two years. Among them, the apparel export continued to improve, and the cumulative export amount from January to June reached USD 71.53 billion, with a year-on-year growth of 40.3 percent. With an average growth rate of 4.4 percent in two years, the proportion of textile and apparel exports increased from 40.8 percent in the same period in 2020 to 51.1 percent; the amount of textile exports has shrunk as the demand for foreign pandemic prevention materials decreases. From January to June, the cumulative export amount was USD 68.56 billion, down 7.4 percent year-on-year, with an average growth of 8.1 percent in two years.
5. Economic benefits continued to grow
In the first half of the year, the economic benefit of the chemical fiber industry increased significantly compared with the same period in 2020, and decreased in the second quarter compared with the first quarter.
In recent years, the structural reform of the supply side of the chemical fiber industry has achieved remarkable results. Backward production capacity has been phased out, new production capacity has been effectively controlled, the growth rate of production capacity has slowed down significantly, and the supply and demand pattern of the industry has improved. This is also the fundamental reason for the rapid recovery of the chemical fiber industry and the substantial growth of benefits. In addition, raw materials and product prices continue to rise, inventory surplus also contributed to a certain profit for the enterprise.
According to the data of National Bureau of Statistics, from January to June, the operating income of chemical fiber industry reached 476.012 billion yuan, 35.05 percent more than the same period last year, and the two-year average growth rate was 5.37 percent. The total profit was 32.658 billion yuan, an increase of 387.77 percent year-on-year, with an average growth rate of 56.44 percent in two years; the operating profit margin was 6.86 percent, up 4.96 percentage points year-on-year and 3.75 percentage points higher than the same period in 2019; the percentage of loss-making enterprises is 22.00 percent, 20.75 percentage points narrower than the same period in 2019, 4.52 percentage points narrower than the same period in 2019; the loss of loss-making enterprises was 2.711 billion yuan, 60.42 percent less than the previous year and 12.77 percent less than the previous two years.
6. Fixed asset investment resumes growth
According to the National Bureau of Statistics, from January to June, the actual completed fixed asset investment in the chemical fiber industry increased by 16.6 percent year-on-year. New production capacity is still mostly concentrated in leading enterprises, its scale advantage has been further consolidated. With the gradual investment of new production capacity, the contradiction between supply and demand of the industry will appear in stages, but the disorderly competition will be significantly reversed, and the self-discipline of the industry will be greatly improved.
In the second half of the year, the volatility of the chemical fiber market is likely to increase due to the uncertain factors such as the trend of international oil prices, the repeated outbreak, the direction of monetary policy and the sustainability of backflow orders. Due to concerns about the production cuts and downstream demand, oil prices in July have shown significant volatility, and the subsequent upward pressure has increased, but it is expected to still support the cost of chemical fiber. The recurrence of the pandemic at home and abroad will still have a great impact on the terminal consumption and shipping market, but also increase the uncertainty of the recovery of the terminal market. In the second half of the year, as the production of new chemical fiber equipment will continue to increase the pressure on the downstream market, it is expected that in the third quarter, in the traditional peak season, the chemical fiber industry can still maintain a good operation situation, but the fourth quarter of the risk of decline is greater. It is expected that the annual chemical fiber output, exports, economic benefits and other operating indicators will still be significantly better than 2020, however, due to the low base in the first half of 2020 and the continuous recovery in the second half of 2020, so in 2021, the growth of the industry indicators will show a significant trend of high before and low after.