Direct-spun PSF plants release output reduction plans successively

Background: In late June, the direct-spun PSF plants jointly supported the processing spread after the unexpected incident happened (one trader faced forced liquidation on futures market and could not conduct the business normally). Direct-spun PSF prices quickly rose from around 7,500yuan/mt to 8,000yuan/mt. Later, polyester feedstock prices fluctuated down, and PSF producers followed lower by 200yuan/mt slightly. Traders sold at lower level, leading to the market's high-low price gap widening to around 500yuan/mt. Some downstream spinners shifted to purchase from traders again or used low-priced goods to replace high-priced ones. Entering July, PSF plants have faced continual rise of inventory, and now at a moderately high level.

Event: In late July, plants decide to maintain the processing spread and start to cut output. Most plants plan to cut output by 10-15%. Recently, plants release the plans successively, which are as follows:

The planned output reduction volumes are around 500-550kt this week, and operating rate will drop by 5.3% to 79.4%, which is at a low level except the period during the Spring Festival holiday. Most plants indicate that the reduction will last for more than half a month.

Impact: Due to the output cuts, direct-spun PSF output in August is expected to decrease moderately, to be around 686kt. This is expected to represent a low level in monthly output for the third quarter.

With lower output and increased contract goods in August for some plants, PSF plant may face less inventory pressure, which is favorable for supporting the processing spread, giving the market certain confidence.