Cash flow of PFY did not seem to have big further downward space

Cash flow of PFY did not seem to have big further downward space. As for polyester feedstock market, fundamentals of PTA and MEG were sound, and stocks are expected to reduce in Oct, supportive to price. Will price of PFY end reducing?

Price of PFY is expected to be hard to stop falling. In the short run, feedstock market has support, but downstream demand is poor, which will weigh on PFY price. The traditional peak season in Sep-Oct does not see sound demand, and market will enter traditional off-season in Nov, so demand is anticipated to weaken further. Stocks of grey fabric are slanting high this year, and the holiday schedule for the Spring Festival is supposed to be earlier than past years. It is known that some water-jet plants even intend to shut down for holiday in Nov. As for PFY plants, many witness apparently rising inventory burden after the National Day holiday, with stocks slanting high now. Inventory of POY is around 10 days and that of FDY is around 16 days. To control stocks, PFY plants may have to cut price for promotion in expectation of weaker demand if the run rate is not revised down. If PFY plants choose to slash run rate, cash flow may improve, but price of PFY does not bound to increase. Therefore, polyester feedstock market may reduce affected by changing fundamentals. In medium run, after new capacity of PX, PTA and MEG starting operation in the future, polyester feedstock cost is supposed to be weak when price of crude oil does not surge. Then, PFY market may follow the downtrend.

All in all, cash flow of PFY has been substantially squeezed and FDY descriptions are not profitable. Price of PFY may be hard to suspend decreasing dragged down by demand in short run and worries on upstream feedstock market in medium run. However, price of PFY may not reduce rapidly and the decrement is likely to be small amid poor profit.