A "barrier lake" for direct-spun PSF

Direct-spun PSF has fallen back since Mar with PSF futures down from 8,500yuan/mt to 7,000yuan/mt, a decrease of 1,500yuan/mt or 17.6%, and spot one down from 8,000yuan/mt to 7,000yuan/mt, a decrease of about 1,000yuan/mt or 12.5%. By now, both PSF futures and spot one have retreated to the level before Spring Festival.

Among polyester products, direct-spun PSF witnessed the largest decline.

But it was not caused by higher inventory or worse downstream acceptance. On the contrary, direct-spun PSF plants were in short supply and downstream plants profited better compared with POY.

There are mainly two reasons behind this wave of quick decline.
1. Spot-futures traders and traditional traders sell off at a large amount.

After PSF futures declined, direct-spun PSF plants held firm prices due to short supply. Traditional traders partly lowered prices after gaining profits. For spot-futures traders, they were advantageous in price under trades by basis, driving spot PSF market to deteriorate quickly.

The sales ratio of spot-futures traders and traditional traders reached 40-50% at the most in the first half of Mar.

2. Hedging of direct-spun PSF plants, long position of capital and short position of processing spread contribute to sharper changes in PSF futures.

Currently, though direct-spun PSF price returned to 7,000yuan/mt or lower, downstream polyester yarn mills still procured for rigid demand instead of stocking up actively under lack of orders which led to continuous fall in prices and accumulation in inventory. On the other hand, spot-futures traders and traditional traders held stocks at hand and they were not attracted by current market price, so they would not hoard further. As a consequence, direct-spun PSF market loses flexibility gradually after filled with rigid demand.