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Insight | Time: Mar 23 2020 3:28PM
Direct-spun PSF plants partly operate by futures mode
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Affected by the epidemic, the market kept falling after Spring Festival holiday. Especially crude oil price slumped close to $20/b, followed by polyester feedstock. Direct-spun PSF decreased a bit more slowly, so its cash flow was considerable.

Upon high cash flow of direct-spun PSF, downstream buying interest was thin though the price has declined below 6,000yuan/mt. At present, downstream expected the price to move down to about 5500yuan/mt. However, direct-spun PSF plants did not show strong willingness to undersell with low inventory. In addition, as crude oil and polyester feedstock rebounded and tended stable, downstream plants more intended to go bottom fishing, but with adequate stocks of raw materials and high spot price, operation by futures mode appeared. 

Currently, only a few plants operated by futures, and they were centered on May-Jul contracts. Take May contracts as an example. May direct-spun PSF futures price = May polyester feedstock futures price + (1200~1300)yuan/mt.

For direct-spun PSF plants, they gained mixed profits due to different processing costs. The processing cost of some old plants including water, power, labor and so on was at about 800-900yuan/mt without depreciation, while that of those which were put into operation within 10 years was mostly at 1,000-1,200yuan/mt.

From the perspective of downstream spinners, the futures price was about 5500yuan/mt or lower, indicating more opportunities than risks. In particular, as the recycling of re-PET was difficult, re-PSF price moved up close to direct-spun PSF price, thus downstream spinners shifted to use direct-spun PSF in production increasingly, which was a good opportunity for direct-spun PSF to squeeze re-PSF despite the tough year. Therefore, the demand for direct-spun PSF was relatively optimistic.

On the other hand, some plants said that the customers adopting this method for bottom fishing were mostly sensitive to price and they may not have high loyalty. Therefore, they did not want to adopt this operation.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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