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Insight | Time: Mar 12 2021 1:41PM
Plunge of raw materials drags down polyester yarn market
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Direct-spun PSF experienced sharp ups and downs like roller coasters alongside polyester feedstock after Spring Festival holiday. According to CCFGroup, direct-spun PSF price moved up from 6,250yuan/mt on Jan 30 to 8,075yuan/mt on Feb 26, with an increase of 29.2% in less than one month. Investment banks adjusted up assessment of crude oil price in Q2 successively, thus stocking up and reluctant selling spread along polyester industry chain from polyester feedstock to polyester yarn. However, polyester feedstock and direct-spun PSF started continuous decline since end-Feb, and the latter was even cut by one third of previous increase. Upstream and downstream players tasted mixed feelings when facing such a volatile market.

Difficult sales perplexed direct-spun PSF plants. Spot profit of direct-spun PSF reached 450yuan/mt at the lowest and 1,000yuan/mt at the highest, which was outstanding among polyester products to date. But currently downstream participants and middlemen hoarded a large amount of PSF, depriving the price advantage and resulting in hard sales of direct-spun PSF plants with sales ratio less than 10% in most of the time from early Mar to date. In short term, direct-spun PSF plants are not eager to lower price for sales with orders at hand and cost support. A wave of procurement may come until late Mar to early Apr when current stocks are consumed to a certain extent.

It is the same for polyester yarn market. Spot profit of polyester yarn remained above 1,000yuan/mt since Mar, but downward raw materials cooled market sentiment down obviously. Traders stocked up much previously and now showed strong willingness to sell, so low-priced sources continually appeared on the market. In Fujian, T32S was mainly traded at 12,900-13,500yuan/mt by polyester yarn mills, but lower at 12,400yuan/mt by traders. Similarly to PSF market, spinners was in the dry tree compared with traders. With poor sales ratio for several consecutive days, price of polyester yarn retreated gradually, but the decrease was slow due to support of orders (most spinners in Fujian hold orders for 7-15 days). According to market participants, polyester yarn can obtain great profits at 12,200-12,700yuan/mt when PSF price is at 7,200-7,700yuan/mt with processing cost of 5,000yuan/mt, so polyester yarn still has downward room.

For polyester yarn traders, it is more difficult. They worry about not only further decline of raw materials and heavier look-on mood on downstream market, but also loss of price edge if spinners keeps lowering prices, so they choose to sacrifice prices for sales. Some of them expect raw materials to rebound after the fall and polyester yarn prices to return to high level then.

In terms of downstream weavers, they saw a rise of about 1,500yuan/mt in raw materials after Spring Festival holiday when they have not resumed production. Fortunately, most weavers held adequate stocks and customers with rigid demand procured sporadically. Recently they stayed on the sidelines amid the decline of polyester yarn. The sales ratio of polyester yarn mills will not improve until stocks are consumed to a certain degree.

[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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