How to break the deadlock on polyester filament market?

Sales of polyester filament yarn have been mild since overall commodity market dropped on Feb 25. Why? Mindset on upstream and downstream market has been obviously diversified.

From the angle of downstream sector, downstream buyers expected PFY price to slip when prices of oil and polyester feedstock headed south and they were willing to wait as PFY prepared before could guarantee production for a short period year to date. Otherwise, replenishing PFY was risky.

As for PFY makers, they held optimistic view toward price and demand throughout 2021. Recent slack sales was not a problem for them as downstream buyers needed to restock once PFY prepared was used up.

That meant overall PFY market shifted into a stagnation.

Actually, prices and cash flow of PFY have decreased to a certain extent but remained high relative to those of PSF.

Initially, players did not worry about later tendency when run rate of downstream twisting units and fabric mills was high and optimistic view was held toward demand in 2021. However, current stocks of PFY were almost close to or even exceeded the earlier peak in Q3 2020. On the contrary, PSF were out of stocks in PSF markers and many plants witnessed backorders.

Such situation may continue based on the present situation.

On one hand, operating rate of twisting units is high and some twisting units start expanding capacity from last year. That means rigid demand for PFY can be described as tolerable. On the other hand, operating rate of PFY plants cannot be seen as low and PFY plants do not intend to cut down production temporarily based on the survey made by CCFGroup.

With falling PFY prepared at hand, downstream buyers may have 2 options later: compromise and accept current high PFY price or scale down production and shut down for holiday (the coming Tomb-sweeping Festival: Apr 3-5, or the May Day holiday: May 1-5). Downstream enterprises that have gained profit may be willing to purchase, while, for some companies witnessing poor orders, they may encounter bigger difficulty if price discussion is not smooth.

Actually, cotton yarn mills presented similar mindset at the beginning of 2021. They held bullish view even when cotton prices kept falling as stocks of cotton yarn declined substantially in Sep and Dec 2020. However, as time goes on, commodity market falls and coupled with Xinjiang cotton issue, recent cotton yarn prices are mixed. Spinners & fabric mills and fabric mills & apparel makers are seeking the most appropriate prices too, ending up with stagnated trading. In the best case, downstream buyers accept high upstream price if demand is good enough. Everybody is happy under such circumstance. The deadlock will not be broken unless each side takes a step back.