Cotton and PSF prices moved up sharply on hopes of revival in demand after the holidays. Post the holiday, downstream orders were not as good as expected and both cotton and PSF prices declined. In March, the commodity market was affected by the banking system issue and cotton and PSF prices declined.
In late March, PSF prices first climbed, and the market recovered fundamentally after the banking problem was temporarily resolved. Feedstock supplies were tight with PX and PTA units grounded, and PSF prices rose sharply after a higher feedstock market, but from mid- to late-April, polyester products suffered major losses and more plants cut production. Cut, hence the demand for PTA was expected to increase and at the same time, oil prices started to decline, hence the downward movement in PSF prices. During the May Day holiday, with fears of further banking problems and recession, oil prices fell and PSF prices fell.
But for cotton, since April, the market was subject to speculation about new cotton planting areas, seed cotton harvest rush in the second half, weather conditions in Xinjiang and target price for Xinjiang cotton. Meanwhile, under the impact factor of weather, cotton prices continued to rise in early May.
Both Cotton and PSF have been launched in the futures market with the same financial facility and impact from the macro environment.
Besides, there are more uncontrollable factors in the cotton market than PSF. Cotton is an agricultural crop, and the natural environment and policies have a greater impact on the market; PSF is an industrial product, especially with high potential, so fundamental information has a more direct impact on the market.
Since the beginning of this year, cotton yarn sales have been relatively good overall, and product inventories currently remain below 15 days. However, polyester yarn inventories are accumulating, and at the end of April the inventory has reached above one month high. Lower cotton yarn inventory gives some support to the cotton market, but higher polyester yarn inventory drags the PSF market.
In 2023, the cotton and PSF markets have a similar start but move differently in late April. With the persistently high price spread, let's see if there is a qualitative change.
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Team Sis
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