Some reflections on PFY market tendency after LNY holiday

Downstream buyers had bottom-fishing last week. Sales of PFY improved after price being discounted in the first half of last week. Price of polyester feedstock hiked in the second half of week and PFY plants successively raised price, but downstream buyers presented inadequate buying interest. Sales ratio of PFY was only 20-30% since last weekend. Most downstream buyers have procured enough feedstock able to guarantee production before the Lunar Chinese New Year now. Current feedstock inventory was near 20 days, close to the level during the same period of last year. Based on the pre-holiday purchasing volume in past years, 2/3 of downstream players have finished pre-holiday replenishment now and only 1/3 may restock later. Thus, there will be few sound sales on PFY market before the Lunar Chinese New Year holiday.

PFY price is settled to be stimulated by feedstock cost ahead of holiday, unlikely to head south but have limited upward space too in expectation of scarce downstream procurement. Post-holiday tendency is more critical now. Many players hold bullish view toward post-holiday feedstock market, in expectation of improving demand. Under such circumstance, polyester enterprises and downstream players were active in purchasing feedstock previously. By now, pre-holiday replenishment of companies can be described as entering tail-in period.

As for the post-holiday market, optimistic view is held but there are some points requiring to be alert. Firstly, will the restart of polyester enterprises and downstream plants be delayed after holiday? The resumption of downstream plants may be delayed compared with past years as the return of workers are likely to be stifled. Will polyester plants that have turnaround during the Lunar New Year holiday postpone restart too? Secondly, downstream plants put their holiday ahead of schedule this year while run rate of polyester plants is higher than past years. Sales ratio of PFY is supposed to be sluggish in Feb. Therefore, inventory burden of polyester plants is anticipated to be higher than past years. Will the inventory burden be transferred successfully in Mar? Will post-holiday demand recover as good as anticipated? Finally, many participants expect downstream orders to be tolerable after holiday. However, in fact, only orders for home textiles are moderate now and orders for other varieties are unsmooth due to price discussion issue. Whether order placement will be smooth and timely after holiday should be noted.

All in all, price of PFY is expected to rise in medium-to-long run. Downstream run rate and whether order will chase up timely after holiday are crucial factors affecting post-holiday tendency. If downstream demand improves worse than anticipated after holiday, high inventory of polyester companies will be devalued under high cost. In addition, some polyester plants that do not shut down or scale down in small scale during the Lunar Chinese New Year holiday may decide to have turnaround by that time.