OREANDA-NEWS. April 18, 2012. China's polyester markets, which started to show signs of a recovery last week, made a downturn once again after a three-day holiday as polyester fiber inventory levels remained high, market sources said.

As a result, the sentiment in the purified terephthalic acid and monoethylene glycol markets weakened as demand for the two key polyester feedstocks fell again.

China's polyester chain markets started to recover last week, driven by rising textile sales. According to market sources, textile sales in China hit over 6 million meter earlier last week, the highest level since the Lunar New Year holidays.

The sales/production ratio in the polyester markets also rose last week; and market sources said the ratio was at 150-200% compared with below 100% a few weeks ago.

But the sales/production ratio started to retreat from the weekend and was pegged at 50-60% this week. On Thursday, the ratio was reported at 40-60%.

China's polyester fiber markets have been bearish after the Lunar New Year holidays, pressured by high inventories.

Polyester makers built their inventories actively before the Lunar New Year holidays, expecting strong demand after that. But fears of an economic slowdown particularly in China and the EU have capped polyester demand, which resulted in high polyester inventories.

"Polyester markets built inventories before the holidays, expecting demand. But it did not happen and the markets ended up with high inventories," said a market source.

Also, due to the high polyester inventories, market participants were expecting the last week's recovery to be "temporary."

But some market sources were still positive. "It is very difficult to keep a sales/production ratio at over 100%, even if the market conditions are very good. We need to see more [of the polyester markets] to assess the real trend," said a market source.