Polyester yarn depressed by the costs and demand

In the past one month, PSF and polyester yarn experienced intense fluctuation. In late Sep to mid-Oct, they surged stimulated by costs with direct-spun PSF up 1,200yuan/mt and polyester yarn up 1,500yuan/mt. Then they dropped immediately. Currently, spot direct-spun PSF 1.4D is mostly offered at 7,800-7,900yuan/mt, down about 500yuan/mt from the high, while polyester yarn declines more slowly with T32S prevailing at 13,300-13,400yuan/mt in Fujian, down about 300yuan/mt from the high.

The fluctuation of direct-spun PSF is mainly attributed to the costs. The prices of direct-spun PSF plants are hit heavily by the participation of spot-futures traders in trades in addition to excessive supply against demand and occupation of re-PSF. For example, spot prices of direct-spun PSF are now offered by the plants at 7,800-7,900yuan/mt, higher at 8,000yuan/mt, but the basis for Jan’22 contracts sources of a large plant is at minus 180yuan/mt (basis=spot price-futures price), thus the purchasing price will reach as low as 7,650yuan/mt by this way. By contrast, direct-spun PSF plants have to adjust down prices along with costs.

Polyester yarn is more resistant to the decline. Most polyester yarn mills hold pre-sale orders which could last to early Nov. However, the demand is bearish now. There is no large difference for the spinners to offer 13,500yuan/mt or 13,800yuan/mt, so they do not lower prices so actively. Then the product inventory of polyester yarn increases quickly. Downstream weavers reported that the orders were far worse than the same period last year. This wave of rise in late Sep to early Oct was mainly driven by orders for“Double 11 (Nov 11)”shopping day. Apart from the actual demand, there was also speculative demand spurred by electricity restriction and production cut and the rise of raw materials. However, after the price rose high, buyers turned reluctant to accept it. Then raw materials dropped so quickly out of expectation and the market participants started to stand on the sidelines thereby. Some believed direct-spun PSF would rebound later amid tight supply and high price of crude oil. Nevertheless, PTA plants now run at over 80% and the processing spread is high within 700-800yuan/mt, so it has downward room. Direct-spun PSF will be hard to change current weakness and polyester yarn will continue to retreat. Later, downstream weavers will focus on consuming stocks and polyester yarn will step into weakening territory, both price and trading volume.