The pain of direct-spun PSF price decline

PSF futures market has been constantly decreasing since July, to reach the lowest of 6,398yuan/mt during the night trading session of yesterday, with a decline of around 1,400yuan/mt, hitting multi-year new low.

Spot PSF prices also follow lower, and prices have declined to 6,900-7,200yuan/mt, with a decline of 755yuan/mt, a new low within the year.

During the round of decline, the entity plants suffer severely, especially during mid-to-late Aug and Sep, spinning mills hold expectation towards the traditional peak season, and they replenish feedstock at low level mostly periodically, but the continuous replenishment and price decline lead to the devaluation of feedstock and product inventory in spinning mills.

PSF plants are also hurt. Though the processing spread is up gradually based on spot price, which reaches a year new high of 1,500yuan/mt now, the actual realization of profits is low, and both product and feedstock inventories are depreciating.

For traders, despite the ability to hedge, as futures prices gradually approach the 7,000yuan/mt mark, many have shifted from hedging to taking unilateral long positions, driven by the price fluctuation range and the expectation of a bullish market later. This has resulted in losses in both the spot and futures markets.

The current decline has completely surpassed the trends indicated by the fundamentals, creating a sense of powerlessness and uncertainty about when the bottom will be reached. This is fundamentally why the market sentiment has collapsed, leading to a reluctance to stock up easily.

In this round of decline, compared to other polyester products, the drop in PSF is relatively the smallest. This is also a result of the factories' coordinated efforts and self-discipline measures such as production cuts.

As the price of virgin PSF drops to the 7,000yuan/mt, the market is paying attention to the substitution between virgin PSF and recycled PSF. After all, the price gap between the two has once again narrowed to around 500yuan/mt. If this low price difference persists for long, it may not necessarily be a bad thing for virgin PSF.