Direct-spun PSF price to start a second round of fall

Direct-spun PSF price hiked for around half a month after the Spring Festival and then retreated all the way from mid-Feb till end-March, totaling a fall of 1,500yuan/mt. In early-mid April, it slightly rebounded while started dropping again in late-April. And in May, such a decline sped up. 

Tumbling commodity market due to tightened liquidity was credited for the first round of fall, which dampened previously positive market sentiment for sustained hike. And though the sentiment somewhat recovered in April, not strong polyester feedstock and gradually weakening demand still shed cloud on the market. Thus the sentiment turned bearish again. 

In the first round of fall, direct-spun PSF cash flow showed very good on the whole as polyester feedstock cost declined more than direct-spun PSF and rigid demand also lent some support. Losses from high-standing inventory of finished goods though was quite great. As for this round of fall, bearish market sentiment and sluggish demand or high inventory were the main causes. Polyester feedstock performed range-bound, thus it sped up direct-pun PSF price fall while decreasing while slowing down the process while hiking. Some plants inventory spiked to around 15-25days after the International Labor Day. And as demand shows no sign of warming up, more plants moves to lower the price to boost sales, thus its cash flow drops from 600yuan/mt to 300-400yuan/mt. 

At present, traded price declines to 7,200-7,400yuan/mt, and market players anticipate it to further fall to around 7,000-7,200yuan/mt. Should this level is reached in mid-late May while no support from polyester feedstock and commodity market appears, downstream concentrated restock may be limited. 

Sustained price decrease, however, may benefit for demand expansion and future price rebound. On Apr 18, the Chinese government passed a bill to ban solid waste imports. Though when and how it will be carried out is uncertain, this would surely bring about much influence on recycled polyester fiber industry in the long run as domestic re-PET import dependency rate hit as high as 50%. Once the import is banned, shortened feedstock supply is expected to lead to hiking feedstock cost of recycled polyester industry, which is favorable for virgin PSF to grasp re-PSF market share. In the short term, amid low price spread of 900yuan/mt of virgin PSF and conventional close virgin PSF as well as anticipated supply shortage of re-PET on rainy days in June, virgin PSF demand is expected to recover. 

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