Direct-spun PSF: A good start from limit up

PSF futures ushered the first limit up on the first trading day after Spring Festival holiday (Feb 11-17), with May contracts once rushing up to 7,762yuan/mt. Spot direct-spun PSF followed the rise, from 6,800-7,000yuan/mt to 7,200-7,300yuan/mt with an increase of 300-400yuan/mt or close to 5%.

The trading volume also increased, with sales ratio at 260% on average on Feb 18. In addition to order-taking from some spinners, spot-futures traders participated in actively as the surge of PSF futures weakened the basis further, and they were prompted to purchase spot PSF.

Downstream spinners also chase up with enthusiasm. In Fujian, polyester yarn was offered 700-800yuan/mt higher than that before Spring Festival with T32S at 12,500-12,800yuan/mt. In Hebei, polyester yarn moved up 800yuan/mt to 11,800yuan/mt and polyester sewing thread rose 700-800yuan/mt with bright 40S/2 prevailing at 15,500-16,000yuan/mt. However, the trades were sporadically done at this price as terminal plants will restart later and they has restocked before the holiday.

Polyester yarn mills resumed production and the operating rate recovered quickly. Especially in Fujian, the migrant workers mostly stayed there during the holiday due to the pandemic, so the mills achieved to restart from Feb 14-15. Currently, the operating rate in Fujian has recovered to 60-70%, higher 90%. In Shandong and Hebei, it rallied to 50-60% and in Jiangsu and Zhejiang, it was 40-50%. Most mills in Hubei are expected to restart next week.

PSF futures showed trend into correction and spot PSF also returned to peaceful territory. Downstream polyester yarn mills mostly restocked raw materials to be used to mid- to late Mar, so they will defer their chase for high price and mainly consume stocks in short run.

In Mar, polyester yarn mills will generally resume production to normal level and the demand for PSF is expected to be strong. But due to hazy end-user orders and fabric prices, PSF will fluctuate in correction in short term with uptrend still existing in Mar.