Direct-spun PSF: adjustment evolving to downtrend

PSF futures plunged recently, confirming that there is a quick fall after a quick rise. The increase of 2000yuan/mt for PSF May contracts before and after Spring Festival holiday has been cut 50% or more.

Spot direct-spun PSF price was also dragged down by selloff of spot-futures traders, but it moved down more slowly and has been cut by about 40% of previous increase.　

The sales ratio of direct-spun PSF plants was bleak in this round of fall. In Mar, the daily sales ratio remained bearish overall and only reached 100% in several days.

The active transactions were seen in on-call trades of spot-futures traders. Sanfangxiang sources were mainly traded at 7,000-7,300yuan/mt by on-call trades. The basis also strengthened from minus 450yuan/mt~minus 400yuan/mt to minus 300yuan/mt. In addition, the stocks of spot-futures traders at hand have declined to about 70kt after underselling.

Some spot-futures traders were also reluctant sellers, and some even purchased further at current low price. They were optimistic to the return of basis, and had confidence to later increase in factory warehouses of traders and direct-spun PSF plants.

Traditional traders mostly sold at normal tempo according to market situation and no underselling was seen. On the one hand, they sold much during previous increase of price and meanwhile purchased less at high price, so their stocks reduced gradually. On the other hand, they may not procure from direct-spun PSF plants due to the high price. Adding bullish expectation to mid- to late Mar, their selling price is between direct-spun PSF plants and spot-futures traders.

Some market players who believed the market was in normal adjustment turned pessimistic under the pressure of continual fall of PSF futures. However, the robust basis indicated that market players did not want to breach the threshold of 7,000yuan/mt.

Currently direct-spun PSF plants and traditional traders were waiting spot-futures traders to sell out and futures market to stabilize after large volatility. The normal adjustment also needs more time to restore.

Polyester yarn price also stepped down quickly and decreased about 500-1,000yuan/mt lower than previous high. Recently the inventory of polyester yarn mills kept rising. The orders of spinners in Fujian mostly can maintain 7-10 days, longer half a month. Therefore, if the market sustains bearish, polyester yarn mills may accelerate to revise down price. With high cash flow, the mills may sacrifice price for sales.

On the whole, changes in PSF futures market affected spot PSF market significantly, and whether the market will return to previous low or stick to 7,000yuan/mt is determined by the trend of futures.