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Insight | Time:Dec 4 2017 4:08PM
PFY market to adjust down with lower profits in December
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The cost sector turned bullish in the middle of November and pushed polyester products up despite the fact that end-user demand softened gradually. Firm costs stimulated speculative demand and PFY sales heated up. However, the market retreated quickly and market focus returned to the end-user sector again.

Since PFY prices were pushed up to high levels, the most products of downstream plants were in losses. Based on bearish expectation of the end-user demand, speculative demand backed off. PFY sales cooled down and PFY inventory increased. Therefore, PFY plants revised offers down at the end of the month to complete sales task. As a result, PFY sales saw a blowout.

As we can see, though downstream demand softened gradually, downstream plants were willing to stock up when PFY prices lowered. The major reason is that twisting plants and looms all kept steady operating rates. On one hand, the lunar New Year is in the middle of February, still far away. On the other hand, those plants still have unfinished orders and also fabric inventory is low and they can store certain fabric stocks.

Judging by current situation, feedstock sector may not drop much since PTA spot supply was tight and MEG inventory kept dipping. MEG market sentiment softened but no substantial damage on the market fundamentals. PTA and MEG markets may track the movements of crude oil and bulk commodities.

As to PFY market, given current stock levels, PFY plants may not adjust run rates down in the short term. PFY margins were lucrative and PFY plants may revise offers down when inventory increases. Downstream plants will have to replenish stocks to maintain production. Therefore, PFY prices may slowly decrease and PFY profits will drop but PFY inventory may increase gradually in December. If PFY prices reached the favorable levels in January, PFY market may embrace the stocking-up rush before the lunar New Year.
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