Direct-spun PSF plants - time to build inventory

Direct-spun PSF was dragged down by the return of crude oil.

PSF futures moved down close to year’s low and the prices of spot direct-spun PSF offered by the plants also declined, yet at a relatively slow speed. In addition, the prices offered by spot-futures traders were lower. The basis for the sources held by spot-futures traders was mixed as they held cargos with different brands and the stocks in the warehouses among them differed a lot.

The sales of spot-futures traders sustained since the fall of PSF futures from the second half of Oct. The cargos they held were reduced quickly, and thereby the basis got enhanced without basis appropriate for replenishment. Especially in East China, with stricter electricity restriction in Jiangsu and Zhejiang at early stage, the actual stocks in the warehouses of direct-spun PSF plants stayed at a small amount–like that of Sanfangxiang, Huahong and Huaxicun ranged in 7-15 days, so the basis there strengthened obviously. In South China, the restriction on electricity had less impacts and the actual inventory maintained at about half a month for long. Therefore, spot-futures traders put priority on selling out South China sources while turned reluctant to sell East China ones.

Entering Nov, direct-spun PSF started to be rangebound at over 7,000yuan/mt. Recently, as crude oil price dropped, it declined through the threshold of 7,000yuan/mt and further dipped to touch the bottom.

In terms of product inventories in direct-spun PSF plants, most of them were low or even negative even if they were in uptrend. For example, the inventory of Hengyi Yida and Yijin slid quickly after 25-30kt of direct-spun PSF for PF11 contracts were delivered.

Looking from raw material stocks of spinners, most spinners stayed on the sidelines when direct-spun PSF was falling previously, though some restocked. Overall raw material stocks kept decreasing, and to low level in the year, so the spinners are likely to procure direct-spun PSF later.

For spot-futures traders and traditional traders, their cargos at hand increased after the delivery of PF11 contracts, but most of the cargos were from Hengyi and other brands were less. Some of them may restock if meeting proper prices or basis.

In conclusion, the demand for restocking is gathering, but the amount is not clear as rising operating rate will exert supply pressure and on the other hand, polyester yarn demand keeps soft and the inventory is accumulating.

When direct-spun PSF moves down to 6,500-6,800yuan/mt, the plants will attract more attention and it is appropriate to build inventory moderately by dip buying.