Direct-Spun PSF Faces Further Inventory Accumulation Pressure In June

The direct-spun PSF market has experienced relatively flat operations from January to May 2024. Apart from significant production cuts and shutdowns during the Spring Festival holiday, the operating rate has remained largely normal. In the first quarter of 2024, the operating rate averaged 76.6%, a slight decrease of 0.7% from the same period last year. The second quarter is expected to see more stable operating rates compared to last year.

In April and May 2023, the direct-spun PSF spread narrowed to 500-600 yuan/mt, leading to gradual production cuts and shutdowns. However, in 2024, the spread has improved, and inventories are at medium to low levels, prompting an increase in operating rates since April. With no shutdown or production cut plans for June and new capacity coming online, the operating rate may reach its highest level of the year.

As a result, PSF supply is expected to increase significantly in the second quarter compared to last year, rising by about 300 kt or 16.7%. Despite this, direct-spun PSF inventory slightly increased in May. As the downstream market enters its slack season in June, orders may decline further. Although yarn inventory remains low, spinners are likely to show less interest in purchasing feedstock and may struggle to accept high feedstock prices. Consequently, PSF supply is likely to reach a high level in June, potentially leading to oversupply and further inventory accumulation.