PSF industrial chain experiences smooth transition during May

In the first half of May, influenced by the continuous decline in raw material prices and downstream wait-and-see attitude, direct-spun PSF prices fluctuated and fell. However, in the second half of the month, raw material prices rebounded, and downstream spinners purchased intensively at low level, so direct-spun PSF sales improved and prices also went upward.

Since the beginning of May, apart from sewing threads, spinners have generally reported a decrease in orders. Especially in the first half of the month, due to the drop in cotton and polyester staple fiber prices, prices of polyester yarn and polyester/cotton yarn have been lowered by 100-300yuan/mt in order to secure orders. By the second half of the month, with the rebound in cotton and polyester staple fiber prices, prices of polyester yarn and polyester/cotton yarn stabilized, with factories focusing on fulfilling orders without following the raw material price rebound trend.

Consequently, in the second half of May, inventories of polyester yarn and polyester/cotton yarn decreased instead of increasing. Spinners hold a pessimistic view on future expectations and are currently focusing on inventory control. This situation has led to an expanded cash flow deficit for polyester yarn and polyester/cotton yarn in the latter half of May.

With a focus on sales, mills have maintained a relatively high operating rate compared to last year, reflecting a strong sustained demand for polyester staple fiber but with a relatively weak acceptance for high prices. Therefore, while there has been an increase in trading volume of low-priced staple fibers in the latter half of May, a price hike of over a hundred yuan leads to a wait-and-see approach. Consequently, the strength of the price increase for polyester staple fiber in the latter half of May lagged behind that of polyester raw materials, resulting in further compression of PSF spread to the 800-900yuan/mt, with inventory levels remaining healthy.

As Chinese domestic demand is expected to weaken further in June and with escalating sea freight costs in May, polyester staple fiber and yarn factories have reported that orders have been somewhat affected. If sea freight costs remain high in the future, the sales pressure for polyester staple fiber and yarn will further increase.