Impact of one unexpected incident in PSF market

Recently, there have been widespread rumors in the PSF market about one trader (who faced forced liquidation on futures market and could not conduct the business normally). Setting aside the reasons behind the incident itself, let's examine the impact of this incident on the current PSF market.

It is understood that currently, 60-70% of the PSF traders have direct or indirect business dealings with this trader. Those directly involved in trade relationships are more significantly affected, while the impact on indirect persons is relatively smaller.

Impact 1: Disappearance of low-priced sources, boosting market sentiment

Previously, this trader had been consistently selling PSF at extremely low prices in the market. After this incident, the low-priced sources in the market will disappear in the short term, contributing to boosting market sentiment. The competition pressure among traders will also decrease, leading to a healthier market environment.

Impact 2: Physical inventory reduces, strengthening the basis

Due to recent concentrated liquidation by traders, some factories have experienced a rapid decline in physical inventory, leading to a tight market supply situation and strengthening the basis.

Impact 3: Direct-spun PSF spread may recover

With the disappearance of low-priced sources in the market and the decrease in physical inventory, factories have shown a stronger willingness to hold or raise prices. The recent tight supply of PTA provides price support, but as operating rate gradually recovers, the support will weaken, and the direct-spun PSF spread may recover gradually.

Since the listing of PSF futures, this situation has occurred for the first time, providing a good warning to market participants: risk management should always be a top priority!