China’s polyester, textile and apparel industries could be under pressure as a result of the new coronavirus outbreak and resulting economic disruption, new comments suggest.

Hubei, the central Chinese province of around 60m people at the epicentre of the outbreak of the virus, is at a virtual standstill, according to Salmon Lee, principal consultant at international chemicals consultancy Wood Mackenzie.

He notes that all transport links have been cut amid the lockdown, and that passing through the Yangtze river – stretching from one end of China to the other – has become impossible. Land transport is limited. 

“If the virus spreads further, more cities and/or provinces in China could see a similar lockdown,” he explains. “That would be a logistical catastrophe and disruption to the polyester and textile industries would be disastrous.”

According to Lee, Hubei, and much of central China, is an important manufacturing base for the textile industry – with many textile, print and dyeing businesses clustered there. 

“A prolonged transport paralysis will mean no fibres or fabrics produced in the major production bases in coastal provinces of China will be sent inland – whether by road, rail or along the Yangtze. Similarly, the delivery of apparel and other finished textile products to other parts of China, as well as exports, could also stall.”

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Many workers from polyester producers, spinners, weavers and garment manufacturers had returned to their hometowns earlier in January, ahead of the Lunar New Year holidays. 

“These workers may not be able to return to work amid the badly disrupted transport network. What’s more, the originally week-long holiday was extended to 2 February nationwide. Shanghai and at least 23 other municipalities and/or provinces have mandated no resumption of work before 9 February.

Drawing a parallel with the SARS crisis in 2003, polyester production may weaken as business activities stall.

“Polyester and downstream production will likely fall this month. This could extend further if the epidemic is not brought under control soon. The SARS crisis in 2003 brought down Chinese polyester production for three months. 

“Very importantly, prices tumbled for polyester products and raw materials, PTA and MEG. This rattled the petrochemical markets, including the paraxylene industry, and the plunge was seen almost across the board for the industry.

“Similar concerns have taken hold of the industry recently. Demand growth could be derailed amid economic inactivity and supply chain disruption.”

A spike in demand for medical supplies and protective gear will likely benefit polypropylene fibre producers as this is the main raw material for this equipment. But only a “miniscule” amount of polyester fibres, both virgin and recycled, are used. 

“The polyester industry, and in extension the downstream textile and apparel sectors, could remain in a lull for some time,” Lee adds. “Given the SARS crisis took approximately four months to peak and another 2-3 months to taper off, this epidemic could also follow a similar pattern.”

There is a silver lining among the dark clouds. In 2003, the SARS crisis did not last beyond the summer of that year, and the rebound in demand during H2 2003 was robust. China’s GDP growth that year registered a year-on-year growth increase overall, despite the difficulties in the first two quarters. 

The hope is that this time, “the post-coronavirus markets in the polyester chain may also see a quick and strong recovery by the middle of the year.”

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