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Insight | Time: Nov 2 2022 1:56PM  Editor:Dilys Wang
Substitution of virgin PSF for re-PSF may be seen with narrower price spread
 
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In the report of Three Major Difficulties on Recycled PSF Market, we have mentioned that recycled chemical fiber plants are difficult in purchasing feedstock, but recycled costs are hard to decrease and recycled chemical fiber faces pressure, which may lead to narrower price spread between virgin PSF and re-PSF, so substitution of virgin PSF for re-PSF may be seen.

 

On Oct 31, spot PSF price was 7,550yuan/mt, PSF Jan contract was 6,514yuan/mt, with a spread of 1,024yuan/mt. Spot PSF-PSF futures basis keeps expanding. With weak anticipation on macroeconomic and demand, PSF Jan contract has dived recently, and most market players expect spot PSF prices will reduce, leading to lower price spread with re-PSF. If virgin PSF prices fall down to 6,500-7,000yuan/mt, close virgin PSF prices face large downward pressure.

 

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The downward space for PET flakes is supposed to be limited, and if macro environment has no extreme changes, the decrement is likely to be 200-300yuan/mt. Close virgin PSF prices are assessed based on different feedstock prices.

Feedstock varieties Feedstock costs (after-tax), yuan/mt Close virgin PSF price, yuan/mt
PFY waste from water-jet loom 4,300 5,300
PFY waste from water-jet loom and PET flakes 1:1 4,976 5,976
PET flakes (direct-processing for close virgin PSF) 5,500 6,500
Polyester popcorn and PET flakes 1:1 5,736 6,736
Polyester popcorn  5,500 6,500

Note: recycled chemical fiber plants use feedstock at different price level and different proportion based on products and demand. The table is showed briefly.


Overall, price spread between virgin PSF and close virgin PSF is likely to be within 500yuan/mt in the future and substitution of virgin PSF for re-PSF may be seen. The price trend should be watched closely. 


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Nevertheless, if macro economy sees extreme changes, such as crude oil prices return to a low, and plants cut production largely with inadequate demand and PET flakes consumption in non-recycled chemical fiber fields reduce, recycled chemical fiber plants can dampen PET flakes again. Based on historical market, PET flakes prices have further downward space.

 

In addition, currently, low-priced HC virgin PSF is basically flat with high-priced HC re-PSF, at around 7,700yuan/mt. On Oct 31, the price spread between HC virgin PSF and HC re-PSF was 780yuan/mt, later, the price spread may keep shrinking.

[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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