Asian POY capacity is expected to increase from 12 MTPA in 2001 to 14 MTPA in 2005. In China, POY capacity is expected to increase from around 5 MTPA in 2001 to 6.5 MTPA in 2005. The increase in supply would be mainly due to the debottlenecking of the existing plants and an increase in the operating rates. (Source: CRIS Infac).

Domestic scenario
During the 2001-02 to 2006-07 period, capacity expansions are likely to be incremental, in line with the demand growth. In addition, existing players are expected to undertake modifications and debottlenecking of their plants.
In the medium term, new capacity additions are likely. Reliance Industries Ltd., Century Enka Ltd., Indo Rama Synthetics Ltd. and others are undertaking capacity additions, which are likely to commence operations in 2003-04. Viscose Filament Yarn (VFY) and Nylon Filament Yarn (NFY) producers have also increased their capacity utilisation from the second half of FY 2002-03.
Companies such as Raymond Synthetics, DCL Polyesters, Rajshree Polyesters and Modern Synthetics are expected to undertake debottlenecking exercises, which are expected to increase their capacities by around 10 per cent.

Market Potential - Gap Analysis
International scenario

During the 2001 to 2005 period, the increase in demand is expected to be at around 2.9 MTPA, as compared with an increase of around 2 MTPA in the world capacity. As a result, the operating rate of the global POY industry is expected to increase from 78 per cent in 2001 to 86% in 2005.

Domestic scenario

CRIS INFAC estimates good demand growth for man-made fibres and yarns in 2003-04, in line with the growth in fabric production. CRIS INFAC estimates fabric production to grow by 6 per cent in 2003-04, based on expectations of an improvement in the domestic economy (a GDP growth of 6.4 per cent in 2003-04 from 4.4 per cent in 2002-03) and the cyclical recovery pattern in fabric production (fabric production has increased at a lower rate in the past two years). An expected growth of 6 percent would translate into an increase of about 2,500 million square metres in fabric production, resulting in additional demand of 240-250 million kgs. of yarn. Since the growth in cotton yarn in the past five years has been low, the additional demand is likely to be met by higher production of non-cotton yarns. As per the Apparel and Export Promotion Council (AEPC), readymade garment exports to the quota countries increased phenomenally, by 18.33 % to 502.9 million pieces during January to April 2003, over the corresponding period in 2002. (Quota countries account for around 93 % of the total readymade garment exports). The increase in volumes was accompanied by a 32.45% increase in value terms to $ 1,864.5 million over the corresponding period in 2002. The volume growth in readymade garments is expected to continue further, as India operates mainly in the lower- end of the market, which has a huge export potential. On an average, every six extra pieces of garments will lead to an additional demand of 1 kg of yarn.

The share of non-cotton fabric in total fabric production is estimated to increase, due to the lower availability of cotton, reduction in the excise duty on non-cotton yarns, and higher cotton yarn exports. A tight supply situation is expected in the POY market, in spite of the expansion and debottlenecking of capacities. Plants are expected to operate at higher capacity utilisation rates. Given the demand-supply imbalance, imports are expected to increase during the 2001-02 to 2007-08 period. Imports from South Korea and Taiwan could increase due to a decline in the exports to China. (China increased its polyester yarn capacity significantly in 2000 and 2001, due to an expected increase in demand from the apparel industry, with the removal of import quotas in 2005 under the WTO obligations.)

Keeping in view of the strong fundamentals mentioned above, CRISINFAC has projected a strong CAGR of 7.8% in POY industry. Demand–Supply forecast is summarized as under:

The products sold by the company are industrial products having wide applications in diverse consumer related industries. POY / PFY find maximum application in the manufacture of Sarees, Ladies dress materials, shirtings, and household fabrics. The weavers in the powerloom and handloom sectors are the major consumers of these yarns. The demand for POY is concentrated in India’s major powerloom centers- Surat, State of Maharashtra and Bhiwadi. The marketing offices of the company in the towns of Surat, Mumbai and Ludhiana basically cater to these regions.