Direct-spun PSF: prices up but then down, how does the industry perform?

In late June, PSF futures market went higher largely, but gradually slipped in correction after consolidating at a high level in early July, and now the prices have dropped to around 7,500yuan/mt, completely erasing the earlier gains.

Compared to the futures' volatility, the spot market's correction is limited. Particularly in terms of plants, the willingness to ensure the processing spread remains strong, with prices only dropping by 100yuan/mt. Currently, the mainstream talking price for semi-dull 1.4D PSF is around 7,900yuan/mt. However, traders still use futures profits to subsidize spot losses. As futures continue to decline, traders are gradually reducing prices to the range of 7,500-7,700yuan/mt, leading to an expanding gap with factory prices.

With high factory prices and difficult sales, the pace of inventory accumulation has accelerated since July. Currently, the logical inventory is at a moderate level for the year, while physical inventory is at a yearly high. Therefore, the next half month will be a real test for PSF factories.

In terms of downstream market, during the earlier price increase phase, polyester yarn prices follow up generally, but polyester/cotton yarn prices are dull to rise. Currently, the cash flow loss for polyester yarn is not significant, while the loss for polyester/cotton yarn is at a yearly high.

In terms of polyester yarn transactions, downstream procurement was active in the first half of the price increase phase, leading to factory inventory reduction. However, after prices reached high levels, there has been a lot of observation, resulting in another phase of inventory accumulation. Some areas, such as Shandong and Hebei, have seen more product cut or operation suspension due to losses and inventory pressure.

Currently, the market is in the slack season, with accumulation pressure increasing for both upstream and downstream market of PSF, waiting for demand to emerge.