Recycled PSF prices rise propelled from supply and cost sides

HC re-PSF offers rose by 200yuan/mt generally during the National Day holiday (Oct 1-7), and on Oct 11, plants continued to raise the offers, up by 200-500yuan/mt overall, to be offered at 7,500-8,200yuan/mt. Close virgin PSF prices also stepped upward. On Oct 11, the major trading prices of HTLS close virgin PSF in Jiangsu have risen to 6,800-7,000yuan/mt, after-tax and that in Hebei rose to 6,400-7,000yuan/mt pre-tax. Market players mainly concern about two questions: Why do the prices rise and will the upward momentum continue?

This round of rise is mainly promoted by the supply side and cost side, while the demand is ordinary. On the one hand, the supply reduces sharply affected by the dual control policy. During the National Day holiday, most HC re-PSF plants in Cixi received the provisional notice to be shut for 7 days. To achieve the goal of controlling energy consumption and intensity, plants in many regions are expected to cut production in the fourth quarter of this year. Currently, the policy on plants is uncertain. It is heard that plants in Jiangsu, like Taicang, Changshu and Wujiang, mostly receive provisional notices currently. In addition, air pollution regulation will come in winter in Hebei and Shandong. On the other hand, crude oil prices surge. WTI futures were at $75/bbl before the holiday, and now, at around $79/bbl. PET fiber chip offers continue to rise, and PET flake suppliers are tight sellers. In the meantime, the dialogue between China and the United States and lower sea freight is also supportive the market.

Currently, HC re-PSF inventory in most plants is relatively low, as well as close virgin PSF.

Under such background, re-PSF cash flow has reached above 1,000yuan/mt, but actually, the profits are not that high, mainly under the pressure from three factors.

Firstly, frequent shuts under power rationing. Since May, 2021, plants begin to face power rationing, especially plants in Guangdong market. In Sep, the dual control policy is seen, and many plants are shut frequently, and the situation may last till end year. Moreover, the notices from the government are mainly provisional, and plants are hard to arrange the production plan in advance. Some plants with electric generators face higher costs.

Secondly, higher auxiliary material prices, especially caustic soda, silicone oil, titanium dioxide and biomass fuel. Part of HC re-PSF plants reflects that the costs has risen by about 100yuan/mt.

Thirdly, many orders are concluded at lower prices previously. Currently, plants continue to conclude previous orders, and inventory in most plants is low or some plants have no inventory.

For the market trend, pay attention to the development of dual control policy in the fourth quarter and macro sentiment. In face of lower supply and support from costs, and with low inventory in plants, the prices are easy to rise but hard to decline.