PSF futures on the agenda, can PFY and PET bottle chip futures far behind ? –
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PSF futures on the agenda, can PFY and PET bottle chip futures far behind ?

2019-06-12 09:14:01 CCFGroup

Last week, "Announcement on Soliciting the Delivery Brand of Polyester Staple Fiber Futures" released by Zhengzhou Commodity Exchange triggered widespread response in the polyester market. Brand delivery will be adopted in delivery of PSF, the same as PTA, which means that the preparation for the listing of PSF futures has been put on the agenda. 

The reporter of the Futures Daily learned that as early as around 2011, there were PSF companies calling for PSF futures, so that companies could have more financial instruments to avoid market fluctuation risks. After PTA futures were listed for many years, the market is increasingly calling for futures for PFY, PSF and PET bottle chips. The commodity exchange is also strengthening forward-looking research to promote the listing of related products orderly.

For the polyester industry, although the current industrial chain has two futures varieties of PTA and MEG, and the cost of polyester feedstock can be locked through PTA and MEG futures, the PFY and PSF are mostly spot goods and the price goes with the market, which still can not meet the needs of industrial customers.

"For the PX-PTA-polyester industry chain, because there is no PX futures, PTA producers cannot timely lock the production cost through the futures market, especially the import dependence of PX is still around 60%. PTA producers can only passively accept fluctuations in feedstock prices." Huatai futures analyst Yu Yongjun said that the domestic PX market has faced an important turning point in recent two years. With the startup of large refining units in China, the import dependence of PX will be greatly reduced. PX prices will fluctuate a lot inevitably, and PX manufacturers need a tool to avoid risks.

"From the perspective of the downstream polyester market, although the participation of polyester companies in the futures market can lock in the cost of feedstock, it cannot evade the risk of falling prices of polyester products. For the end-user market, it is also impossible to lock the cost of feedstock through the futures market," Zhang Xiaozhen, an analyst at Guangfa Futures, said that the price of polyester feedstock rose in July-August 2018, but the terminal products was difficult to rise, resulting in large-scale losses and shutdown of plants. "Adding futures varieties in the PTA industry chain is necessary for the healthy and long-term development of the PX-PTA-polyester industry chain," she said.

"For the PTA industry chain, the listing of PSF, PET bottle chip and PX in futures market will help unite PTA upstream and end-user sectors to participate more in the futures market." Hao Daqing, head of Zhongyin Resources Chemical Division, said. In the past, when only PTA futures is available, industrial institutions using futures to assist in production and operation are somehow restrained. "Supplement of futures in the industry chain will definitely help industrial enterprises to explore deeper and wider, raise enterprises' efficiency utilizing futures, attract institutions to allocate more capital to PTA industry chain, which in turn may greatly promote PTA industry chain futures' activeness."

Launch of PSF futures is beneficial for enterprises to hedge according to market conditions and production and operation rhythm. "Enterprises can sell forward market contract to hedge, and combined with the raw materials price to determine whether to lock profits or not. This is conducive to the company's future production arrangements. Making good use of this tool could help stabilize and scale up production." Pang Chunyan said, Analyst of SDIC Essence Futures.

China is the world's largest PTA producer and consumer, and the PTA industry chain has supported the half the textile industry. As a practitioner in textile and apparel industry, Hao Daqing has always had a dream, he hopes that China will no longer be synonymous with low-end textile and apaprel processing, but the whole industry chain will have a place in the international market from raw materials to branded garments.

Nowadays, after the internationalization of PTA futures, while serving domestic industrial customers, PTA futures have also begun to go international.

The Futures Daily reporter learned that PTA futures have been on the market for more than ten years, and its correlation between spot prices has increased, the participation of relevant enterprises has been high, the functions of price discovery and risk aversion have been well performed, and the effect of serving entity economy has gradually emerged. "On the basis of a solid industry, the opening up of the PTA futures market will not only further enhance the influence of PTA futures prices on the international market, but will also provide pricing and risk management tools for global related companies in international trade, and promote China to become a global polyester product pricing center." Hao Daqing said.

In 2018, domestic polyester enterprises took the PTA futures price as the benchmark and seized the opportunity in the international market.

It is understood that the correlation between PTA futures price and upstream PX spot price reaches 0.8, and the correlation with downstream PFY and PSF approaches 0.9. Therefore, domestic upstream and downstream enterprises generally judge the long-term market according to PTA futures price and quickly make operation strategy. Companies that cannot participate in PTA futures tend to be in a disadvantageous position in the competition, and it is difficult to grasp the opportunities in the market.

On July 18, 2018, the PTA Sept futures contract rose by 140yuan/mt, kicking off the rise. On the same day, the domestic PTA spot price increased from 30yuan/mt premium on Sept futures contract to the 180yuan/mt premium. “Domestic PTA factories either suspended selling spot goods or bought spot goods, while at least 26,000 tons of spot PTA were bought by Chinese polyester plants from the PTA factories in South Korea, Japan and the traders in Singapore under low price due to the lag." Industry insiders said.

In the latter half of the month, PTA price rose, and the domestic polyester enterprises kept up with the rhythm of PTA futures and rapidly raised the quotation of PFY, PSF and PET bottle chip, while the manufacturers in India, South Korea, Vietnam and Europe lagged behind. A large number of orders were sold at relatively low prices, so manufacturers in India, South Korea, Vietnam and Europe suffered heavy economic losses in August and September 2018.

In August 2018, PET bottle chip plants cancelled the delivery of 50,000 tons of PTA warehouse receipts. However, many market share of foreign PET bottle chip plants was snatched by Chinese companies after experienced this wave of movement due to the lack of corresponding hedging methods.

"After the price increase caused by the shortage of spot PTA, enterprises of the global PTA industry chain deeply understand the importance of ZCE PTA futures pricing in the global polyester industry chain. Chinese companies have an advantage in international competition because they make a good use of PTA futures. " Insiders said.

Since November 30, 2018, PTA futures have been approved to become specific varieties open to global traders. Foreign PTA traders, PX related companies and downstream polyester plants and related companies have gradually become familiar with the PTA futures market and participated in it. In the future, the listing of polyester filament yarn and staple fiber in futures market will further improve the PTA industry chain futures variety tools and provide more comprehensive services for entities.

"The different voices in the industry chain have improved the price discovery function of PTA, so that both upstream and downstream can obtain reasonable hedging gains, which in turn will further promote the active trading of PTA futures and attract more foreign traders..." Industry veteran Li Jie said that after the internationalization of PTA futures, the improvement of polyester industry chain futures varieties will also bring more opportunities for foreign investors.