Where will PSF go in Jul after sharp rises and falls?

Direct-spun PSF experienced sharp rises and falls in Jun alongside PX. It once surged to over 9,000yuan/mt, but then by late Jun, the futures have returned to the level before it rose as PX fell back.

However, spot PSF did not drop so much. Why?

1. The safety checks in Fujian have lowered the operating rate of direct-spun PSF in H2 Jun.

The operating rate of PSF for spinning once rallied to 80%, but as the safety checks in Fujian were put into operation and Shanli and Jinlun cut or suspended production, it moved down to 75% or below. Therefore, the supply tightness appeared and slowed down the decrease of PSF price.

2. Available spot PSF held by spot-futures traders reduces, and strengthened basis supports the market.

After great production reduction in Apr-May and the surge in early Jun, physical PSF stocks in PSF plants were at a small amount. Thus, though the market faltered in Jun and basis trade showed evident price advantage, the spot-futures traders could not deliver spot goods and raised their prices, which avoided PSF price to fall soon.

Nevertheless, with Jul coming, market expectation is changing. The units suspended previously in Fujian will restart and Xinfengming will launch new lines, so PSF supply is likely to increase in Jun. On the other hand, polyester yarn inventory stays high, and it will hinder the consumption of PSF, so PSF inventory will accumulate again. In addition, spot-futures traders will offer lower, which will drag down the price of spot PSF. Overall PSF price will further move down as the risks are eased. When it declines to 8,500yuan/mt or below, downstream restocking is expected to rise.