Synopsis
- China, the largest supplier of polyester yarn globally, is 6-8 times in size than the second largest player i.e.,
India. Due to China’s zero-COVID policy and subsequent decline in domestic consumption, Chinese
manufacturers started dumping polyester yarn in the global market at cheaper rates. - Consequently, there was a significant increase in supply of polyester yarn in India thus impacting average sales
realisation of Indian polyester players. Despite strong domestic demand, the operating profitability (PBILDT)
margin of Indian players was significantly impacted due to competitive pressure to reduce sales price to counter
cheaper Chinese imports. - To safeguard domestic industry against cheap imports and inferior products, the Government of India (GoI)
implemented a quality control order (QCO) from October 2023 on polyester yarn which is expected to curtail
polyester yarn imports. - With a potential improvement in average sales realization along with stable raw material prices, the spread of
polyester yarn is likely to improve. This is expected to gradually boost operating profitability from Q3FY24 (FY
refers to the period from April 01 to March 31) while substantial improvement is expected from Q4FY24
onwards. - The PBILDT margin for Indian polyester yarn players is expected to improve by around 100 bps in FY24 over
FY23 and around 200 bps in FY25 over FY24 thereby reaching pre-COVID levels.