Direct-spun PSF: consolidating while waiting for opportunities

Since late October, direct-spun PSF market has been in a sideways overall. PSF futures market is in the range of 6,750yuan/mt and 7,050yuan/mt and spot PSF prices fluctuate at 6,950-7,250yuan/mt. In terms of the absolute price, it has been at a low level within the year, but downstream spinners still have no replenishment operations. There are two reasons.

1. Since November, polyester yarn inventory continues to accumulate, and the decrease in orders has also made spinners hesitant to procure raw materials.

In the second half of this year, after a destocking of polyester yarn in September, there was a slight inventory accumulation in October, which intensified in November. Currently, the inventory is near its highest level for the year, leading spinners to purchase raw materials on need-to-basis.

2. The outlook is relatively weak. This expectation is influenced by both anticipated polymerization costs and downstream order forecasts. In December, there is an expectation of 3 million tons of new PTA capacity into operation, while polyester operating rate is currently around 93%, which is a high level for the year, leaving limited room for further increases. In fact, some polyester plants may reduce production in December. Therefore, from a supply and demand perspective for PTA, there is excess pressure, and support to direct-spun PSF is weakening. Of course, the new PTA supply is beneficial for PX demand, so attention should be paid to the dynamics between the two parties.

Downstream orders are currently facing a gradual decline, with some spinners already reducing production in November. The scale and intensity of production cuts in December are expected to expand further, and coupled with the previously mentioned weakening support from PTA, spinners have a lower willingness to replenish feedstock.

The lack of confidence in the downstream market has led to increased pressure on the inventory reduction of direct-spun PSF in November. Although PSF plants are lowering prices to sell, overall inventory remains around half a month.

Fortunately, Yida plans to shut its 400kta unit for maintenance in December. If executed on schedule, the supply-demand pressure will be somewhat alleviated.

If the market drops to a certain level in the future, downstream stockpiling may begin before the Spring Festival holiday; otherwise, downstream spinners will continue to purchase feedstock on need-to-basis.