Will direct-spun PSF usher the dawn?

PSF futures experienced a sharp decline in the end of May, making market players more hesitant. The cash flow of spot direct-spun PSF was also compressed to zero line, even once breaking through the zero line.

In May, direct-spun PSF market was supported only by rigid demand, leading to bleak sales. How about that in Jun? Direct-spun PSF price shows upward momentum recently. Will it sustain in Jun?

In terms of polyester feedstock, crude oil stays at high level and the inventory of polyester feedstock does not accumulate obviously. In addition, the spread of PTA-naphtha ranges in 400-500yuan/mt, and has limited room to decline. Therefore, the cost support for direct-spun PSF is moderate. 

From the perspective of the supply, Huhong will cut production by 150kt/yr in Jun, and Yizheng Chemical Fiber and Jinlun will restarted their 100kt/yr and 250kt/yr units respectively. Thus, the rise of operating rate may weigh on direct-spun PSF market.

In demand terms, the raw materials in downstream spinners mostly can be used to mid- to late Jun, so intensive replenishment may be seen around mid-Jun. Besides, traditional traders and spot-futures traders hold a small amount of cargos at hand. If the basis or the price of direct-spun PSF moves to a proper level in Jun, this part of demand will be stimulated.

In conclusion, although the operating rate of direct-spun PSF will increase in Jun, downstream demand for replenishment and stocking up also exists. If they appear intensively, the inventory of direct-spun PSF may not accumulate. If the demand is periodical like pulse, the proposal of product cut will be put on the agenda again in Jun or previous intention of production reduction may be implemented. At that time, direct-spun PSF price may climb up again with the upward momentum seen from current price change.