PFY producers hike prices to combat the losses

China PFY market sees some changes after keeping relatively stable for much of May.

In the beginning of May, two large PFY plants were shut due to environmental protection requirements. However, PFY inventory still remained high, despites that another two plants implemented production cuts in mid-May. Then, with feedstock pricing rebounding, PFY prices were at loss levels, and sales picked up.

Afterwards, the market expected that the suppliers could cut production to combat the loss and high inventory, but instead, large plants decided to hike prices.

It is reported that major plants would hike prices gradually beginning from May 23 to ensure positive processing spread. PFY plants could either hike prices or cut production to alleviate the losses. Large producers did not reach agreement on production cuts, but turned to increasing the prices jointly.

On May 23, the market is quite mixed. Some large plants have raised the prices but the extent of increase is different, while some other plants keep the prices stable or even lower prices. As crude oil price is volatile, it is difficult for suppliers to make decisions.

As downstream plants have completed restocking earlier, if PFY prices are raised significantly, the sales may stagnate till end-May or early Jun. In this case scenario, PFY inventory would increase to highs and then suppliers may begin production cuts again in Jun.

In fact, Jun is important to market participants to observe the supply and demand. Estimated based on downstream twisting and weaving operating rate data in record in 2016-2023, its can be seen that the operating rate typically moved lower in Jun-Aug. The demand for PFY may weaken during the slack season, but there're still uncertainties.

The forecast is based on historical data and expectation of production cuts, but there could still be some changes and variables.