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Insight | Time: Apr 15 2019 1:58PM
Sluggish end-user demand to be the largest hidden peril of PSF
 
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PSF plants and polyester yarn mills perform well year to date. In Dec 2018, the eased China-US trade war stimulated market demand obviously. PSF and polyester yarn inventory slid quickly and were short of supply during Spring Festival, leading to high operating rate of PSF plants. After Spring Festival holiday, PSF plants and polyester yarn mills mainly focused on fulfilling previous orders, which was favorable to the transition amid the moderate demand.

As the previous orders were finished since the end of Feb, PSF plants faced the pressure from later orders, especially polyester yarn mills. During this period, the sales, inventory and profits of polyester yarn all showed positive appearance, and the price also kept stable. But later, the inventory accumulated, forced by soft orders.


From the above chart, the sluggish orders had influences on the market which was reduced by other factors on the market, so the market still seemed normal.

In late Mar, the market presented some changes due to the VAT rate cut. From Mar 20, both upstream and downstream witnessed optimistic sales ratio. The inventory of polyester yarn transformed from accumulation to average 10 days and that of PSF stayed at 7 days. However, the improvement of demand was just on the surface. In fact, the good sales ratio of PSF was mainly attributed to the orders placed in advance. PSF inventory then increased and the sales were restricted. It was reflected in Apr. In early Apr, the orders were so scarce on the market and little PSF was sold. Although the sharp rebound of PTA on Apr 4 brought intensive orders which were still advanced, it is still an overdraft of later demand.

The short-term situation will continue later, but the end-user demand still needs attention. The influence of soft demand will be reflected later and the operation and judgment of risks will be more significant.

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