Chemical Fiber Operations, 2016

By Wan Lei, Wu Wenjing, China Chemical Fibers Association

In 2016, industrial added value grew by 6.1% in China’s chemical fiber sector, faster than growth in Chinese industry overall or in the national textile sector as a whole. Main-business revenue was RMB766.28 billion, 3.71% over the previous year. Total profit was RMB36.64 billion, an increase of 19.9%. Profit on sales was 4.78%, 0.65 percentage points higher than in the previous year, while 16.27% of firms lost money, down 3.62 percentage points.

Steady increase of operating rates

China produced 49.437 million tons of chemical fibers in 2016. According to sampling and analysis by China Chemical Fibers Association, chemical fiber output grew 3.98%. Operating rates increased overall (see Figure 1) with an effective operating rate of 82%. Polyester filament makers averaged around 76%; polyester staple makers averaged around 70%; makers of viscose filament fiber and viscose staple fiber averaged 91.3% and 90.4%, respectively, both higher than in 2015; polyamide fiber makers averaged 70%, up a bit from 2015; polyurethane fiber makers slowed to an average of 86%.

Prices rise

Prices of large-volume commodities in the international market generally increased in 2016. Domestic prices of major chemical fiber products also rose. The increase was even steeper in the second half of the year, especially in October. Increases reached 30-50%.
Reasons for the increases follow. (1) Production costs increased. Crude oil went up 45%, from $37/bbl in January to $53/bbl in December. (2) State-driven capacity reduction improved the supply-demand relationship. (3) During the G20 Summit in September-November, output of some products was lower than in the same period of the previous year, accelerated the year’s price increases. (4) Demand was sound, both at home and abroad.

Double-digit growth of export

China imported 810.6 kt of chemical fibers in 2016, with an annual decline of 3.64%, while 3.9268 million tons was exported, up 15.48%, and shipping out 7.94% of all output. The export value was 2.92% higher than in the previous year. Polyester filament fiber accounted for 50.34% of the total export volume and polyester staple fiber accounted for 25.98%, totaling 76.32%. The export value of polyester filament fiber and polyester staple fiber accounted for 55.04% of the total export value.

Slowdown of investment growth

Fixed asset investment actually realized in the chemical fiber sector was RMB111.6 billion in 2016, accounting for 14.6% of main-business revenue. The growth of the investment was 0.34%, being 2.53 percentage points lower than in the previous year. Investment growth slowed after 2011. So the creation of new capacity slowed down and capacity reduction goals for the sector were attained.
Sales of polyester filament fiber equipment will reportedly reach a historical high during 2017-2018, and great numbers of new viscose staple fiber units will be put on stream.

Gradual rise of profitability

Profits of the sector totaled RMB36.64 billion in 2016, up 19.86% YoY. The profit rate was 4.63 percentage points higher than in 2015. Among textile subsectors, the profit rate grew most rapidly in the chemical fiber sector. The percentage of firms that lost money was 16.27%, 3.62 percentage points lower than in the previous year, and their losses were 23.11% lower.
With the rising product prices and increasing profits, operations in the sector were obviously less stressful. The main-business profit rate was 4.78% in 2016, 0.64 percentage points higher YoY. The net rate of return on assets was 0.72 percentage points higher. The growth of sales was 2.5 percentage points higher.
With China’s stable macro economy and increased personal income, domestic demand has expanded further. All these factors will help stabilize the textile industry. Output in the chemical fiber sector is likely to grow 3-5% this year, and operating rates are fairly stable, with a slight increase. Prices of major products will keep rising in the first half of 2017. As the reference points set in 2016 are quite high, profit growth will slow down, and the profit rate on sales will not rise this year.