The past year’s recovery in global polyester prices is looking shaky again, threatening to undermine resurgent markets for natural fibres wool and cotton.
A recent sell-off in Chinese polyester filament has seen its price slip almost $300 a tonne or about 15 per cent since late last year.
Price trends for synthetic fibre have followed the slump in global oil markets in the past few years, but polyester values began recovering ground after cheap Chinese filament hit lows around $1000/t in January 2016.
The rebound in synthetic values was partly attributed to rallying textile industry demand for wool and particularly cotton in 2016, which created an associated updraft in polyester demand and price points.
However, the ongoing global oil glut may ensure oil-based synthetics retreat further in price, or at least, stabilise, and boost the attraction of man-made fibres in fabric blends.
Rabobank international agri-commodities analyst, Charlie Clack, said prices from the world’s biggest polyester supplier, China, had slumped in response to crude oil values sliding lately.
“Synthetic fibre production is reliable and cheap, and it competes directly with cotton, so any widening spread between polyester and cotton is a clear threat to the natural fibre market,” he said.
Australian cotton is currently worth about $540 a bale – almost $100 more than a year ago – and New York July futures are near three-year highs.
Apart from the potential for synthetic market competition Mr Clack noted cotton was also likely to come under pressure from itself, after a 21pc lift in the 2017 US crop, and more production in India.
China was also offloading another 10 million bales from its 50m bale stockpile.
However, synthetic fibre price signals are far from clear.
Wool industry analyst and International Wool Textile Organisation’s market intelligence committee chairman, Chris Wilcox, said European and the US polyester staples (made from filament thread and used in wool blends) had not yet responded to recent oil market falls.
In fact, although 20pc below 2015, staple prices were 7pc up on a year ago, and still firming.
Average global prices were about US154 cents a kilogram, a US10c/kg rise since October, while semi-synthetic viscose fibre had also climbed US25c in the same period.
Use of both products in wool-based fabric blends varies with wool supply and prices, oil values and northern hemisphere retail confidence.
Oil prices fell to about $US47 a barrel last month, despite efforts by the Organisation of Petroleum Exporters (OPEC) to restrict production and halt the price slide.
After temporarily recovering some ground, the global benchmark Brent crude price was down again early this week to about $US52.
Unease about rising output from US shale oil reserves and a carryover of significant 2016 stocks around the world have weighed on the market.
However, Rabobank’s Mr Clack said many analysts felt oil’s price volatility would ease as 2017 progressed and OPEC production limits combined with improved northern hemisphere economic activity.
Forecasts of prices at $US62/barrel were common, which would be the highest since 2014 – when polyester ingredient costs began their dive.
Mr Wilcox, also the executive director of the Australian Council of Wool Selling Brokers, said while polyester values would influence wool market activity this year, he felt economic conditions overseas and wool’s price relative to cotton would be bigger factors, particularly for fine and superfine wool.
Textile mills, notably in China, had depleted much of their wool inventories last year and appeared to still be rebuilding.
Rabobank research also suggests advanced and developing wool consuming countries will record “respectable rises” in economic growth in 2017 and 2018.
Consumer confidence in the US was at its best point since 2001 and at an eight-year high in Europe, Rabo said.