INDUSTRIAL POLYESTER YARN COST | 5 MIN READ

Costs and pricing were much simpler when supply and demand were evenly balanced, back in the late 90’s and early 2000’s.  Since then, it’s been difficult to decipher polyester yarn producers’ pricing and cost strategies.  As one of the leading producers of industrial polyester yarn, our customers often ask us for details behind how pricing is determined. In our experience, the following are key pricing and cost considerations in the current market.

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Industrial Polyester Yarn Cost Factors:

To fully understand pricing for industrial polyester yarn, you must first understand the cost factors associated with it. This includes understanding that raw materials associated with developing it, the variable costs that can fluctuate that overall costs to produce it, and the fixed costs that are consistent with industrial polyester yarn production.

Raw Materials

Purified Terephthalic Acid (PTA):  This is the primary raw material in the production of polyester.  It is a powder that is primarily used in the production of polyester. 

Mono Ethylene Glycol (MEG):  This is the second component of polyester polymer.  MEG is essentially anti-freeze.   Polyester production is just one of several markets where this petrochemical is utilized around the globe.

PET Chip:  To produce polyester chip (or polymer), you need approximately 86% PTA and 35% MEG by weight.  Obviously, these figures do not add up to 100%.  An excess of MEG is required to facilitate the chemical reaction.  At the end of the polyester polymer production process, the manufacturer ends up with Spent Ethylene Glycol.  This can be refined and recycled back into the EG markets for other end uses.

Variable Costs

Energy:  The polyester industry is extremely energy intensive.  Tremendous amounts of electricity and natural gas are required as polyester yarn is manufactured in a high heat “melt extrusion” process.

Labor:  Direct labor is a very small component in the polyester extrusion process.  The vast majority of polyester manufacturing occurs in low-cost Asian countries.

Packaging:  Polyester is extruded at extremely fast rates (thousands of meters/minute) and cardboard tubes must withstand very high centrifugal forces as material is wound onto them.  These tubes are not inexpensive and are composed of more than 50% epoxy/glue.  Carboard dividers, boxes, separators and pallets (whether wood or plastic) are also factors.

Duties/Tariffs:  The standard duty rate in the US is 8.8% + 0.47% port fees = 9.27% of the FOB Port price.  This applies to most countries, but China also has an additional 25% tariff with a total of 34.27%!

Ocean Freight:  During the height of the pandemic, some 40’ container costs spiked to $24,000 from a historic cost of ~$2500 from Asia to USA East Coast!  This equates to roughly $0.48/lb., which was more than average polyester polymer costs at that time!  Prices have since fallen but are still slightly volatile, depending on the supply / demand equation and on global issues such as the drought in the Panama Canal and the Red Sea / Suez Canal safety concerns. 

Inland Freight:  Although Hailide America operates warehouses throughout North America, inland freight rates can be significant.  Even when our warehouse is strategically located near our customer base, it can be $0.05 – 0.20/lb., depending on if it is a full truck load (FTL) or less than full truck load (LTL) and the total distance traveled.  Pricing changes can occur throughout the  year, depending on the season, not to mention the overall supply/demand equation which is constantly changing.

Fixed Costs

Investment:  State of the art production equipment is very expensive.  The best in the world is manufactured in Japan and Germany (TMT & Barmag, respectively).  Back in 2020, 110,000 tons of capacity cost approximately $150 million USD.  Regardless to say, depreciation is very high for the first several years.

Quality/Support Services:  Whereas direct labor is insignificant, the team required to support a 220,000 ton/year manufacturing site is expensive.  Large, well-run sites require maintenance, polymer production, quality, technical, machine shops, etc. Employees working in these areas require specific skills and knowledge which typically costs more.

Research & Development:  The R&D process is necessary if a company wants to continue to invest in the development of new products. Companies who are committed to R&D invest in pilot extrusion units. Pilot machines are needed to run small scale samples of new products and are expensive to operate and maintain.  They are necessary as it is extremely difficult to break into a production run to produce samples. 

Industrial Polyester Yarn Pricing Factors

Costs:  The barrel of oil and refinery capacity utilization rates drive PTA & MEG pricing. All the other cost factors play into the total cost to deliver.

Capacity Utilization Rates in Polyester Yarn Extrusion:  This is an extremely important variable and one that is difficult to pinpoint or quantify.  One of my former mentors told me that the difference between over and under supply could be one container…… My experience tells me that he was correct.

Due to the high investment costs, polyester producers want to keep assets running 24/7, 365 (or 366 this year).  Idle equipment provides no payback and can be eclipsed by deprecation.  As a result, many producers will keep equipment running if the price is above variable cost.  Below that, it makes no sense.

Markets/Perceived Risk:  Some markets have higher quality requirements than others, namely automotive, seatbelt and airbag.  There is a minimum level of quality required by the entire market (the cost of entry) but there are varying degrees past that, each with its own set of costs.  Some markets have higher rates of claims than other as well.  This factors into the perceived risk component.

Payment Terms:  When money was “free”, this was not as big of a concern, but it was still a concern.  With the current cost of money, payment terms are very important.  Unfortunately, many larger markets have extended payment term expectations.

A Summary of Industrial Polyester Yarn Price Considerations

The factors associated with raw materials, variable costs, and fixed costs all have an impact on the overall pricing of industrial polyester yarn. Because of this, it’s difficult to list the exact price in a single article, as a number that is accurate today may not be accurate in a month.

By having read this article, however, you enter conversations with a manufacturer with a greater understanding of how the pricing for these yarns is determined and what factors influence those prices. If you would like to have a more detailed conversation about this topic, reach out today so that one of our subject matter experts can assist you in determining what pricing looks like for your organization.