Will direct-spun PSF market embrace pre-holiday replenishment?

Direct-spun PSF prices surged to a high of 8,000yuan/mt previously this month driven by feedstock costs, but then crude oil prices fell down and speculative funds receded. PX and PTA prices slipped down in correction, and direct-spun PSF prices also flowed lower.

For direct-spun PSF futures, the decrement was around 300-400yuan/mt, and the futures dropped to about 7,700yuan/mt. Spot PSF prices reduced by 150-200yuan/mt.

Looking at the transaction situation from last week, due to the slow price reduction by PSF plants, the advantage of basis trades was evident, and the trading activity increased. The market players still has a certain willingness to purchase low-priced PSF. Most of this demand is due to the fact that they missed out or adopted a wait-and-see attitude during the previous period of high increases. Recently, with some release of risks and strong support from the crude oil, buyers have started to purchases again.

As the National Day holiday approaches, is there a pre-holiday replenishment intention in the downstream?

From the perspective of spinning mills, the current raw material inventory is relatively low, only about 10 days. During the National Day, a small number of mills in Shandong and Hebei will take holidays, while in Jiangsu, Zhejiang, and Fujian regions, only a few have plans for holidays. Most mills will maintain normal production, so there will not be a large decline in the consumption of raw materials in the later period. There is a demand for replenishment in the market, but whether it will be done before or after the holiday, or in a concentrated or dispersed manner, depends on the absolute price.

From the perspective of PSF plants, due to cost pressures, most of the current prices are in the range of 7,700-7,900yuan/mt, but this price is slightly higher. Downstream yarn mills have a purchase intention at a price range of 7,500-7,700yuan/mt. Therefore, if the PSF price fluctuates within the range of 7,700-7,900yuan/mt before the holiday, downstream spinners will purchase on need-to-basis, and the willingness to stockpile will be low. However, if it can drop to the range of 7,500-7,700yuan/mt, there will be a periodical increase in stocking willingness, especially from the perspective of traders, who will increase their stocking, which will be beneficial for PSF plants to reduce their inventory.