Price of polyester filament yarn has continued dropping since late-Sep, refreshing yearly new low and having hit the lowest level in late-Oct, 2017, and was close to the historic low in end-2015. Will price of PFY breach the historic low?
In view of upstream market, current PX-PTA spread and PX-naphtha spread has hit historic low, and some plants have suffered losses, with limited downward space. MEG cash flow has been during negative territory, having small further downside room. Therefore, if crude oil and naphtha price does not change much, downside space of PX, PTA and MEG is all expected to be capped.
As for the cash flow of PFY plants, FDY units have suffered deficit for more than a month, and POY plants are around cost line, having small reducing space. Thus, once the deficit increases, PFY plants may consider suspending or cutting production.
The downward room for PFY has been not big, but there is some gap compared with the low level in 2015, unlikely to be lower than the lowest price in 2015 based on current situation. Is it time for downstream plants to have bottom fish when downside room for PFY is small?
|Price comparison of PFY|
|Lowest price in 2017||7250||7575||8875|
|Historic low (2015/12/23)||5925||6355||7495|
|Lowest during this week (2019/11/12)||6790||6815||8450|
|Change of this week low on lowest price in 2017||-460||-760||-425|
|Change of this week low on historic lowest level||865||460||955|
Upstream feedstock market gains support, but lacks upward momentum impacted by the new capacity pressure. Market players hold bearish view toward market outlook. As for the fundamentals, stocks of PTA are supposed to accumulate by more than 100kt in Nov, and may rise by more than 300kta in Dec. Supply and demand of MEG may be balanced in Nov, but stocks of MEG are anticipated to increase by 100kt in Dec. Meanwhile, downstream plants have entered off-season, and demand may weaken. Some fabric mills intend to put holiday schedule for the Spring Festival ahead than past years. Current inventory of PFY is medium-to-high, and may accumulate in later period, which may weigh on PFY price.
Comprehensively, price of PFY is expected to have small downward room in short run based on feedstock market and PFY plants’ cash flow status, but price also lacks upward momentum when feedstock market is hard to rise and downstream demand is muted. Thus, price of PFY is likely to shiver at low level in short term. Purchasing on a need-to-basis is expected to have small risk, but the speculative restocking will have small significance as stocks will occupy capital. If price of PFY keeps falling and losses enlarge, PFY plants may cut run rate, and players are suggested to have bottom fishing by that time. If there is big stimulus, participants can have bargain-hunting too, but it is suggested that market players retreat to sideline temporarily.