Direct-spun PSF in Aug: supply may increase limitedly and demand hard to improve

In Aug, direct-spun PSF plants run at a relatively high level, and when prices are at a periodical low level, downstream spinners and traders replenish stocks moderately, but once prices rally, buyers stand on the sidelines and digest the stocks. The market is still fragile.

In the second half month of Aug, Xinfengming delays to start up its new PSF unit, and Jingwei will shut its 200kta unit as scheduled. Therefore, the operating rate may be lower than expected in Aug, and supply may only increase slightly.

For demand, traders and spot-future traders have periodical demand for replenishment when prices are at low level, but the demand has not last. Currently, PSF futures market is lower than spot PSF, and the arbitrage is difficult.

For downstream spinning mills, both polyester yarn and polyester/cotton yarn mills are running with high inventory and low operating rate. Recently, some mills continue to lower the operating rate due to high temperature and power rationing in Zhejiang and Jiangsu, so spinners mainly purchase feedstock for prompt requirement and show low willingness to replenish feedstock.

Currently, polyester yarn inventory is around 30 days, and polyester/cotton yarn inventory is around two months. Spinners mainly cut production, and operating rate is mostly around 40-70%. Some spinners hold pessimistic outlook and operation is only for retaining workers. If end-user demand improves, spinners also focus on selling.

Therefore, supply may increase limitedly in Aug, but from demand side, spinners show no high enthusiasm to purchase feedstock. PSF inventory is expected to keep increasing in Aug, and the buoyant season may shorten this year.