Direct-spun PSF price to approach the year low under bearish sentiment

In early to mid-Nov, commodity and stock markets see rebound under the relaxation of COVID control measures and undervaluation, and stimulated by this, PSF futures rally by around 500yuan/mt. After mid-Nov, the sentiment turns weaker fast.

1. Crude oil market steps lower, no support to PSF

Since mid-Nov, crude oil market has been constantly decreasing from $90/bbl to around $80/bbl. Therefore, the cost support to PSF market weakens and looking-on mood covers on the market.

2. Downstream demand in doldrums

In Nov, orders for downstream spinning mills reduce, and inventory continues to hit new high. Currently, the inventory of polyester yarn and polyester/cotton yarn is generally at 30-40 days. Recently, under the COVID control measures in many regions, some spinning mills cut operating rate or suspend operation. Operating rate of polyester yarn plants drops moderately, leading to lower demand for direct-spun PSF.

3. PSF inventory faces accumulating pressure

In Sep, PSF plants cut production intensively with low PSF spread, then plants hold firm attitude on price and take the discursive power. In Oct, with certain support from moderate demand, high PSF spread maintain overall. In early Nov, stimulated by the news about the changes of COVID control measures, PSF inventory has not accumulated and the pressure is not large overall. In mid to late Nov, traders intend to sell amid worries over the outflow of delivery goods from the futures market and producers see continual weak sales. Inventory faces accumulating pressure.

Under the influences of above bearish factors, direct-spun PSF prices gradually drop and reach 7,000yuan/mt, but downstream spinners continue to stand on the sidelines at this level. In Dec, new capacity expansion will continue on feedstock market, and downstream spinners are expected to cut more production and undersell to recoup capital, direct-spun PSF prices are likely to go downward further.