Polyester yarn mills in panic of PSF shortage amid Covid-19 in Jiangyin

On May 3, Covid-19 pandemic suddenly broke out in Jiangyin and spread fast. As major producing area, Jiangyin takes up 27% of total direct-spun PSF capacity in China. Many direct-spun PSF plants have cut or suspended production due to poor profit. After the outbreak, Huahong was informed to shut down as of May 4, and other plants also face risks of production suspension. In addition, due to strict control, the logistics is stuck into stagnation. The cargos of Sanfangxiang are hardly transported outward, and Huaxicun is also reluctant to keep the delivery.

Among major PSF suppliers for polyester yarn mills in North China, Yida has suspended production for nearly two months, and it resumed only 200kt/yr capacity until this week; Sinopec Tianjin has shut down its 100kt/yr unit for several months; Sinopec Luoyang also cut production by 30kt/yr previously. So PSF supply remained tight since Apr. The sudden outbreak of the pandemic in Jiangyin chopped PSF supply for polyester yarn mills in Shandong, Hebei and Jiangsu. As a consequence, the sales of Desai (in Yancheng, Jiangsu Province, a relatively small plant) improved much with sales ratio averaging at 600% in May 4-5, and its offer also spiked to 8,450yuan/mt, flat with first-line plants, which was rarely seen before.

In addition, some spinners in Hebei changed production from polyester yarn made of virgin PSF to the one made of close virgin PSF. Firstly, the market was bearish at present and the spinners faced high inventory yet low profit. Secondly, the price spread between virgin PSF and close virgin PSF widened to 1,700-1,800yuan/mt, and the spinners had to seek for more economical raw materials. Besides, the shortage of raw materials which could not be delivered from Jiangyin also played an important role.

As things stand, the pandemic in Jiangyin decides the PSF supply to polyester yarn mills in North China largely, but the shortage may sustain two weeks at least. If the spinners do not replace and have no stocks of raw materials, they will be forced to cut or suspend production. Fortunately, Yida will restart 200kt/yr direct-spun PSF unit this week, and another restart of 200kt/yr is in planning, which may solve the urgent need of spinners who do not hold enough PSF.