How long will polyester yarn soar underpinned by the costs?

Polyester yarn moved up firmly boosted by the quick rise of raw materials after Spring Festival. It increased nearly 2,000yuan/mt in just a week, hitting new high since Aug 2019. What’s the logic behind the increase and how long will the increase sustain?

In fact, not only polyester yarn and its upstream market, but also most chemical products moved all the way up, mainly driven by the rise of crude oil and the improvement of the pandemic. For current polyester yarn, the increase stemmed from higher cost brought by crude oil.

Since this year, Brent and WTI crude oil futures soared by 27.2% and 30.4% respectively, pushing up downstream products. Especially after Spring Festival holiday (Feb 11-17), PTA and MEG futures hit limit up several times. At the same time, PSF supply and demand structure performed well and each increase of polyester feedstock could trigger the rise of PSF. According to CCFGroup, direct-spun PSF 1.4D climbed up from 6,475yuan/mt on Feb 5 to 8,075yuan/mt on Feb 26, with an increase of 24.7% in just 20 days. The sales ratio of direct-spun PSF was also favorable with negative inventory and high operating rate over 95%. In addition, there is no new unit to be put into operation. Therefore, direct-spun PSF plants were reluctant to sell without sales pressure. Recycled PSF also followed up with an increase of 25.7% from Feb 5 to Feb 26.

To downstream, polyester yarn price was pulled up quickly and stayed strong with expectation to healthy demand. Once raw materials hike, it will chase up under the support of cost. All varieties of polyester yarn have surged by now with the increase in 1,300-2,000yuan/mt. At present, T32S in Fujian and Jiangxi was mainly offered at 13,900-14,200yuan/mt.

Polyester/cotton yarn also soared.

How about downstream buying after the price rise? With large-scale vaccination, the pandemic will improve and demand will recover gradually. But as things stand, the prosperity in upstream market has not conducted to downstream smoothly. Recently, yarn mills controlled sales as the price spiked, and some spinners required customers to pay in full, showing heavy wait-and-see atmosphere. The procurement was mainly from traders and it was driven by capital and expected inflation instead of industrial demand. Since Feb 26, weavers restarted gradually and the demand was divergent. The weavers with stocks will stand on the sidelines, those with rigid demand will procure according to the market situation and traders will sell previous stocks. Some traders have started to sell successively and downstream market will be clearer after Feb 26 (Lantern Festival).