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Global Synthetic Prices Fall on Lower Oil, Weak Demand

Global synthetic fiber prices fell by 16.3% in June, a steeper decline than May’s 12.3% drop, according to recent data from consulting firm PCI Fibres. This is a strong indication that any firming in man-made fiber prices is not actually going to happen any time soon.

The slow but steady drop in global crude oil prices over the last several weeks is the primary reason, and may lead to further declines. After rising 30 percent between mid-March and early May, oil prices moved within a fairly narrow band between $59 and $61 until mid-June and has since drifted down by several dollars per barrel, pressured by an increase in U.S. stocks and concerns over China demand.

In Asia, the world’s largest fiber-producing region, synthetic fiber prices fell by 15.6% year-over-year, more than twice May’s decline, driven primarily by a drop in the price of polyester, by far the biggest fiber in terms of volume.

Staple prices declined by an average of 4 percent month-over-month, while those of polyester filament have declined an average of 13 percent. Despite a seasonal slowdown in demand, polyester plants in the country have been running at or near capacity, which could be putting additional pressure on prices. A reduction in capacity might occur in the near future if demand doesn’t pick up.

After stabilizing in May, nylon 6 prices edged down by an estimated 2 percent in June. Spandex prices are at historically low levels, having fallen slowly over the past several months, including a 2 percent drop in June, impacted by new capacity that has come on stream at the same time that market demand is softening. However, feedstock prices are not falling as fast as fiber prices, pressuring producer margins.

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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 22.6% compared to June 2014, a bigger year-over-year drop than those of the prior three months. This is primarily due to softness in the polyester filament business that many in the industry feel will continue through the August vacation period. Trade sanctions on Russia have had a severe impact on European textile mills. European synthetic prices ended the month at more than 15 percent above the world average.

The U.S. index fell by more than 12 percent in June, the least of any major world region. Inventories are low and demand is stable, resulting in a high sales-to-capacity level that is keeping U.S. prices 53 percent above the global average. Significant investment by knitters in the CAFTA region and continued strength in automotive sales in the U.S. have fiber suppliers very optimistic that recent stability in polyester filament will continue. Polyester staple fiber pricing has been firm as well, helped by a revival in the housing market that has stimulated demand for fiberfill.