Re-PSF market with upward momentum

Crude oil prices continue to move up after reaching $110/bbl. HC re-PSF producers lack direction. Some producers already start to raise prices, while some still stay on the sidelines. Worries are mainly as followings:

1) Weak demand. Recently, downstream plants mainly purchase on hand-to-mouth basis. Demand is also expected to be not good later. Currently, inventory is high, so plants focus on selling first, to ease the pressure.

2) Downstream buyers are not active to purchase with high oil prices. If oil prices move lower, the market sentiment will be worse.

Therefore, though some big plants continue to rise from late Feb, up by about 700yuan/mt, some plants maintain the prices, or even lower the prices. The situation for close virgin PSF plants is similar. Mixed appearance is seen on the market, and the overall upswing is limited. But recently, re-PSF market has the momentum to rise, mainly because of the sustained high oil prices as the war between Russia and Ukraine may not end in short.

1. The price spread between virgin PSF and re-PSF enlarges

On Mar 3, the polymerization costs have risen to 7,063yuan/mt. Virgin polyester products have seen losses or nearly the cost line. Prices fluctuate around the cost side. If oil prices continue to rise, virgin polyester prices will follow up further. With the support of costs, the price spread with re-PSF will enlarge. Re-PSF has the upward momentum and space.

2. Inventory in most re-PSF plants is not high, except a few plants

Currently, except some plants in Zhejiang, most HC re-PSF plants have low inventory in other provinces. For close virgin PSF, some plants have relatively higher inventory at about two weeks with unsmooth sales, while some plants could have orders till mid-Mar. The inventory is not large in general.

3. Oil prices maintain high, and PET flake prices tick up

On Mar 3, SD PET fiber chip prices prevail at 7,150-7,250yuan/mt by cash. Small and medium orders in Xiaoshan and Shaoxing are concluded around 7,150-7,200yuan/mt, by cash ex-works. In Zhejiang and Jiangsu, hot washed blue and white flakes are at 5,600-5,800yuan/mt, after-tax delivered. PET flake prices are expected to rise.

Overall, the re-PSF prices have the momentum to rise. The risks are that if oil prices move lower, virgin PSF prices may follow lower.