Offers of low-melting polyester staple fiber increased by 200yuan/mt to 8400-8800yuan/mt in the first half of September, although crude oil, pure terephthalic acid (PTA), mono ethylene glycol (MEG) and polyester products presented weak.
IPA price hike----the direct cause
Beside PTA and MEG, isophthalic acid (IPA) is another important feedstock to produce low-melting polyester staple fiber-a modified fiber. IPA only accounts for 13%-15% of total feedstock cost, but still exerts great impact on low-melting polyester staple fiber price due to frequent price fluctuation and high unit price.
IPA price enjoyed another significant increase of 17% from $1230-1250/mt CFR to $1400-1450/mt CFR since late August because of tight supply, while PTA and MEG prices remained range bound during the same period. This ever happened in April-July when IPA spot price went up greatly by 60% from around $1000/mt to about $1600/mt by late July as IPA supply tightened on plant maintenances. Cost hike, therefore, directly drives up low-melting polyester staple prices.
Low-melting PSF price forced up by surging IPA price
Note: Sep data is based on spot prices
Enterprises suffer from low profits
Low-melting polyester staple fiber prices could hardly follow the rapid increase in costs this year due to sluggish demand.
Cash flow of low-melting polyester fiber
Peak season encourages producers
September to November is usually regarded as peak season for low-melting polyester staple fiber. Low-melting polyester staple fiber plants quoted up on rising feedstock rates, and thus hoped to boost downstream replenishment.
IPA supply is likely to increase after Japanese producers restart units in the second half of September from maintenances while demand may weaken with the end of consumption peak for PET bottle chips, hence the surge in IPA price may be not so strong as that in the first half of 2016. At the same time, low-melting polyester staple fiber plants are still cautious about raising prices due to sufficient supply in the market. However, inventories in most plants are still low, so the prices are still expected to increase.
Thus, low-melting polyester staple fiber profits continued going down this year, with the current cash flow below 200yuan/mt. If other operating costs considered, the producers have already suffered losses. Therefore, they were eager to raise the price when IPA prices surged.