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Collapsing Oil Prices Push Synthetic Fiber Prices Lower in August

Global synthetic fiber prices fell by 20.8% in August, their steepest monthly decline in almost four years, according to recent data from consulting firm PCI Fibres. Collapsing oil prices, currency devaluations, and slowing growth in demand are all responsible for the drop. Although fiber industry analysts feel that demand patterns will eventually return to normal, there is little indication that this will happen in the foreseeable future.

After rising 30 percent between mid-March and early May, oil prices stabilized for a while in June and early July but then dropped another 20 percent by late August due to oversupply and weakening demand, causing a decline in intermediates prices.

In Asia, the world’s largest fiber-producing region, synthetic fiber prices fell by 23% year-over-year, their biggest year-over-year drop since September 2011, driven primarily by a drop in the price of polyester, by far the biggest fiber in terms of worldwide and regional volume. Buyers reportedly believe that prices for will therefore continue to fall, and so are only buying for immediate needs. Still-high inventories and tightening liquidity have resulted in a slowdown in Chinese demand for polyester rather than the pick-up usually seen at this time of the year, and may cause further capacity reductions, if not bankruptcies by companies in the textile supply chain.

Chinese demand for staple has been slightly better than for filament. Although prices dropped compared to last year, they were relatively stable compared to July.

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Nylon 6 prices fell by an estimated 4 percent in August, pressured by low utilization rates and weak sales. Spandex prices are relatively soft as well.

Acrylic and viscose prices in China have remained firm and fiber producers have little to no inventory, as the fibers have replaced cotton in some knitted apparel.

Asian synthetic fiber prices are more than 20 percent below the world average.

The European synthetic fiber price index fell by 24 percent compared to August 2014, a bigger year-over-year drop than those of the prior four months. European prices remain 17 percent above the global average, though the major holiday period in August was a quiet one for the textile business, with much of the purchases for immediate use only.

The U.S. index fell by more than 14 percent in August, the least of any major world region, but its biggest monthly drop since November 2011. Polyester filament demand from the North American auto industry remains high. Inventories are low and demand is stable, resulting in a relatively high sales-to-capacity level that is keeping U.S. prices 60 percent above the global average. Declining oil prices are expected to push down filament prices in September, however, which may be causing some mills to delay ordering where possible.

Polyester staple fiber pricing has been firm as well, helped by a revival in the housing market that has stimulated demand for fiberfill and stronger demand by yarn spinners. Nylon and spandex filament prices in the U.S. remained stable in August.