Direct-spun PSF market to see downstream restocking coming

Experiencing sharp fall after surging along with the cost, direct-spun PSF market moves into volatility at high price level after Spring Festival holiday (Jan 31-Feb 6).

In the first day after Spring Festival, direct-spun PSF plants generally adjusted offers up to 8,000-8,200yuan/mt, but downstream plants were still on holiday and most of them just stayed on the sidelines with a few purchasing at 7,900-8,200yuan/mt. Then polyester feedstock and PSF futures started to fluctuate within narrow range at high prices as crude oil lacked impetus to rise further. At that time, a part of direct-spun PSF plants and traders started to provide discounts in trading for sales. Subsequently, PSF futures plunged, followed by spot direct-spun PSF, and the market participants turned to the sidelines again.

Why does direct-spun PSF fall back immediately after the spike? Firstly, it jumped in the first trading day without the support of enough transactions under downstream suspension. And polyester feedstock did not keep rising. As a result, more participants adopted look-on attitude.

Secondly, there are concerns about later market. Direct-spun PSF plants gradually raised the temperature of the units and prepared for the restart, and the operating rate will climb up to about 85% by mid-Feb. Therefore, overall supply of direct-spun PSF is expected to increase quickly later. With additional inventory accumulation during Spring Festival holiday, direct-spun PSF plants will face higher inventory pressure after the holiday.

Amid slightly weak adjustment of polyester feedstock side, direct-spun PSF will keep in correction recently, but low-priced sources by basis trading have obtained more and more market attention. Downstream spinners did not stock up many raw materials before Spring Festival holiday while stayed hesitant to post-holiday high prices. With the improvement of operating rate, they accelerated to consume raw materials stocks, so the replenishment for direct-spun PSF is coming.

Downstream spinners will mostly resume normal production after Feb 15, as well as the end-use orders. If direct-spun PSF stops falling and stabilizes, downstream restocking will show up soon.