PTA prices have been oscillating recently. On the one hand, crude oil prices have been relatively strong in the short term, giving PTA some support; on the other hand, PTA’s own supply has shrunk a lot, and the supply of spot goods in circulation is not loose. Under the pattern of spot discount on the market, the support is strong. However, from a long-term perspective, PTA prices will continue to decline.
Costs have room for decline in the long run
The short-term price of crude oil is disturbed by the supply side and fluctuates greatly. However, in the long term, falling demand will still drive the oil price center downward. On the supply side, OPEC+ increased production less than expected. OPEC’s August monthly report showed that its production in July increased by 162,000 barrels/day month-on-month to 28.84 million barrels/day. According to the previous meeting policy, the allowed production increase in July was 648,000 barrels/day. , the actual production capacity is far lower than the target production. Supply disruptions caused by conflicts between Russia and Ukraine have occurred from time to time. Ukraine has stopped transporting Russian oil in transit to Hungary, Slovakia and the Czech Republic through the southern route of the “Friendship” pipeline since August 4, and the transportation flow is 700,000 barrels per day. In terms of demand, the current demand for crude oil is relatively average. The United States has entered the second half of the peak gasoline consumption season, while China is still affected by the epidemic and high temperatures, and the demand for gasoline and diesel is average.
From the perspective of PX, supply is expected to increase, and long-term price decline will dominate. PX profits have seen a major recovery recently, and the price difference between PX and naphtha has expanded to around US$400/ton. On the one hand, naphtha performed weakly, demand still showed no improvement, downstream olefins losses continued, and cracking units were forced to reduce production or even shut down for maintenance. Therefore, despite the restart of Japan’s Mitsubishi naphtha cracker, naphtha prices are still under pressure. The recent decline in gasoline consumption has also put a certain damper on naphtha. On the other hand, the short-term supply of PX is tight, and the short-term supply and demand balance is tight. However, there is a strong expectation for PX supply to increase. First, the stock operating rate will increase due to profit expansion. As of August 12, the PX operating rate in Asia was 72.1%, an increase of 3.1 percentage points month-on-month; second, there is still a large expectation for PX to be put into production, and Sheng Hong Kong’s new PX production capacity of 4 million tons is expected to be put into operation by the end of the year.
Looking at the comprehensive cost-end crude oil and PX, they will mainly fall in the long term.
PTA fundamentals are expected to be poor
It is difficult for PTA’s fundamentals to continue to improve and will continue to deteriorate in the future. In the short term, affected by the maintenance of some equipment and load reduction, PTA supply is operating at a low level. As of August 11, the PTA operating rate was 67.6%. However, the current PTA spot processing fee has rebounded rapidly and has expanded to about 700 yuan/ton. Under the relatively high processing fee, the willingness to increase the burden of PTA later-stage equipment will be stronger, and the supply is expected to rebound significantly. On the demand side, terminals continue to be sluggish. The polyester segment has shown signs of month-on-month improvement in the past few weeks. After joint production cuts by major polyester yarn manufacturers and profit concessions from upstream segments in July, the pattern of high polyester inventory, low profits, and weak demand has shown a marginal improvement. Cash flow improved, factory inventory levels were reduced, and polyester production started rising slightly to 82.5%. However, the terminal order situation has not improved, and it is difficult to increase the weaving start-up, which is still running at a low level. High-temperature power restrictions in some areas have exacerbated the terminal downturn.
After the increase in polyester demand, factory warehouses once again encountered difficulties in destocking due to the inability to keep up with terminal demand. The background of long-term weak consumption is difficult to change for the time being, and gray fabrics still face the pressure of high-yield finished product inventory. PTA demand has been under long-term pressure.
Based on the above analysis, from the perspective of cost and supply and demand, PTA prices are mainly bearish in the long term.
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