PF:Rebound in Short-Term, while still Weak in Medium-Term

In the medium term, the decline brought about by negative feedback from the industrial chain is not over. In March 2021, the structure of polyester staple fiber (PF) converted from Back to Contango. The structure changes first, resulting to the changes in the inventory structure of the industrial chain, and finally to the commodity prices. In March, there was a light trading in the staple fiber spot market, and the optimistic expectations turned from strong to weak. The increase in price resulted from stockpiling after the Traditional Chinese Spring Festival has been erased, and the whole industrial chain has started to present negative feedback. The stock of dying and weaving factories, downstream terminal of staple fiber, has been digested after 3 months. Their operating rate has begun to decrease, while the number of orders has never met the expectations. Although the profit of yarn factories is squeezed, there is still a lot of room for it. In the next two weeks, we will see a reduction in the load of yarn factories. The equity inventory of staple fiber factories will become positive, while its physical inventory will exceed the critical value of 20 days. The high crude oil price correction has just begun. In the first half of 2021, shipping prices are high and the trend of terminal orders shifting to Southeast Asia remains unchanged. It is difficult to change the fact that demands do not meet expectations in short term. The negative feedback of the industrial chain has already progressed 50%. The decline in medium-term is not over in the second quarter due to the collapse in both costs and demands. The market rises and falls for the same reason. Before the new positive feedback is formed by the recovery of downstream demands, driven by the expansion of new orders, it is unlikely for the market to rise sharply. There is a possibility to witness the market rise in late May or early June. In the short term, the market moves forward with hesitation. Driven by PTA, cost-side of staple fiber, and cotton, the substitution of it, the market expects that Indian orders will return back to China, boosting terminal demands of the second quarter, off-season of staple fiber. Therefore, speculation on inflationary expectations of the market sentiment is still in the possibility of a bottom rally. However, it is noted that the May Day is approaching and the holiday of downstream terminal is quite long. Some factories may enjoy a holiday of about 20 days. It is obvious to see cumulative inventory in the industrial chain in May. There will be a pattern of volatility in weekly level.