Direct-spun PSF: prices return to highs, while operating rate hits new low

Recently, with both WTI and Brent crude oil climbing above $100/bbl, direct-spun PSF prices have returned to the highs seen back in March. Although both March and September fall within the traditional peak season, market conditions differ drastically between the two periods.

Contrast between March and September high-price cycles

Back in March, shortly after the outbreak of Middle-East conflicts, market participants drew parallels with the Russia-Ukraine war and assumed the conflict impact would be short-lived, meaning sharp price surges or high-price levels would not persist for long. Accordingly, spot prices swung violently: spot quotes could jump 1,500yuan/mt in one single day only to correct 1,000yuan/mt rapidly the next day. Beyond stereotyped expectations toward warfare-related shocks, manufacturers enjoyed substantial pricing flexibility supported by previously accumulated low-cost feedstock and product inventories.

By contrast, the current high-price level in September rests on much firmer fundamentals. Disruptions to strait shipping have persisted for half a year. Despite intermittent market corrections during this period, massive feedstock stock-building was rarely observed. The renewed sustained price rally from August into September forced downstream buyers to conduct rigid-demand purchases continuously. Consequently, both feedstock and product nventories are held at high-cost levels. Coupled with slim processing spread, manufacturers are left with very limited operational room.

Downstream performance in March and September

During the March rally, downstream affordability for PSF remained untested. Faced with spiking feedstock costs, PSF producers aggressively lifted offers. Nevertheless, the demand dividend generated by low prices in 2025 faded gradually amid price hikes in 2026. At this juncture, cotton and viscose products registered smooth sales and stable operations. Some spinning mills shifted production to cotton and viscose varieties to hedge risks. Within the PSF sector, the rapidly-widening price gap between virgin and recycled grades drove partial substitution toward recycled material, leading to a sharp contraction in virgin PSF demand.

After successive rounds of market volatility, downstream players with poor absorption capacity have partially switched product lines or implemented production cuts. The market's limited capacity for cost pass-through has become evident. During the July-August price uptick, PSF plants adopted relatively conservative price-hike strategies, balancing their own selling goals against downstream buying acceptance. As feedstocks strengthened further in September, however, PSF processing spread stayed depressed, and production cuts alone failed to improve spread-operating rates for PSF have now hit the lowest level year-to-date. Producers have no choice but to firmly defend prices in an attempt to improve current conditions.

Risk outlook

Therefore, even though prices have climbed back to elevated territory, market risks are substantially higher compared with March. Any subsequent price correction would inflict greater damage across the whole industrial chain.