Price spread between virgin PSF and re-PSF enlarges, will market shares of re-PSF return?

Affected by large rise of oil prices, price spread between virgin PSF and re-PSF enlarges in 2022. Price spread between HC virgin PSF and HC re-PSF once reaches around 1,000yuan/mt, and that between solid virgin PSF and solid re-PSF reaches over 1,500yuan/mt, a three-year high level. Then, with a price spread of 1,000yuan/mt, is there substitution between virgin PSF and re-PSF?

Communicating with the plants, the substitution is seen, but is not common. Only a few plants in Hebei and Jiangsu turn to purchase solid re-PSF, and some plants in Zhejiang and Jiangsu turn from 3D HC virgin PSF to 3D HC re-PSF. For substitution, price spread is the precondition, but is not the necessary and sufficient condition.

Before 2018, the price spread between virgin PSF and re-PSF was normal, and the obvious substitution of virgin PSF for re-PSF appeared apparently in 2020. In 2021, some market shares of re-PSF recovered. Currently, the substitution between HC virgin PSF and HC re-PSF is relatively easy, based on their price spread and demand. With weak demand at present, even the price spread is 1,000-1,500yuan/mt, it is hard to see substitution. But if the demand is good in buoyant season, substitution will appear even the price spread is below 1,000yuan/mt. For solid PSF, the factors influence the substitution also include downstream demand, continuity of orders, continuity of price spread, low-priced feedstock consumption, profits of yarn mills, available supply of virgin and recycled PSF.

Currently, polyester products have suffered the losses except PET bottle chip, and virgin PSF plants begin to curtail production from mid-Mar, mainly for solid virgin PSF. Re-PSF prices have not increased much and some plants even provide discounts to sell, mainly affected by weak downstream demand. For HC re-PSF, plants worry about the demand later as the traditional slack season will come in the second quarter. Sales are mostly thin currently, and traders are not active to replenish. Re-PSF price increase is mild during this round of surging oil prices, and the price spread with virgin PSF enlarges.

In short, recycled plants will focus on selling, and HC re-PSF inventory is accumulated fast. If sales see no improvement, the market may be weak in Apr, and production cut may appear. Pay attention to downstream demand.