HC re-PSF market: worriers over the demand in peak season

In Aug, many plants and traders reflect that business activities are worse compared with Jul. In Jul, HC virgin PSF offers stepped upward and sales improved driven by higher costs, and HC re-PSF prices stayed flat mostly, and transactions turned better periodically. Inventory was transferred from plants to traders and downstream markets. In Aug, the market was mild and sales slowed down. Recently, the sales ratio of HC re-PSF plants was mostly at 50-60%, and HC virgin PSF sales were also ordinary. Some plants cut production or suspended operation and operating rate lowered. Prices also moved lower. 7D siliconized HC virgin PSF was mostly offered at 7,400-7,800yuan/mt, after-tax ex-works, some higher at 8,000-8,200yuan/mt. In Zhejiang, HC re-PSF sales were ordinary, and 7-15D siliconized HC re-PSF was offered at 6,400-6,600yuan/mt in Cixi and Jiaxing, 6,600-6,800yuan/mt in Hangzhou and Shaoxing, after-tax ex-works.

Currently, market players lack confidence, and some producers concern about the demand in peak season. The reasons are as following.

1. Exports are unsmooth, and hard to improve in short

A few new export orders are under negotiation in Aug, but the sea freight has reached about half of the product value of HC re-PSF. In Guangdong, one customer stated that one container cost RMB200,000, including RMB120,000-130,000 of product value and RMB70,000-80,000 of sea freight. HC re-PSF exports are not large, and the bargaining power is weak on freight.

2. Inadequate domestic demand and prosperity index declines

HC virgin PSF operating rate lowered with higher inventory and losses, and for HC re-PSF, inventory remained high in Zhejiang, some highly at 40 days, and a few plants suspended operation. Traders mainly concluded previous orders.

For the home textile index in Dieshiqiao, both the prosperity index and purchasing managers’index declined in July, and the prosperity index in Jul was lower than the corresponding period of 2019.

3. Pressure from new capacity of HC virgin PSF

Price spread between HC virgin PSF and HC re-PSF has enlarged this year, and it is around 1,200yuan/mt at present. Some traders reflect that some buyers turn to purchase some HC re-PSF in recent months, but as the production of HC virgin PSF and HC re-PSF is increasing or in recovery this year, HC re-PSF producers have no obvious improvement of demand.

It is intensive capacity expansion period for HC virgin PSF in the second half year, but some new units may be delayed to start up due to unsmooth sales and lower prices. The inventory may pile up in end 2021 and apparent consumption may see smaller increment. Apparent consumption of HC virgin PSF and HC re-PSF may roughly rise by 100kt from last year, but is still lower about 100kt compared with 2019.

In general, market players lack confidence currently, and the market may maintain in Aug, but for Sep and the fourth quarter, pay attention to the macro sentiment and demand.