Introduction: Entering July, the domestic PTA market continued the decline since mid-June. As of July 13, PTA’s main futures 2209 hit the lower limit during the session, falling to the 5570 yuan line, and closed at the lower limit in the afternoon. The main contract 2209 opened at 5782 yuan, reached a maximum of 5830 yuan, and closed at 5570 yuan, down 7.01% from the previous day’s settlement.
Recently, the center of gravity of the PTA market has continued to fall, prices have continued to hit new lows, and the overall trend has been weak. Why does it continue to fall in the short term?
First, the global macroeconomic weakness has led to a decline in commodities.
On July 12, international oil prices fell sharply again. The settlement price of August 2022 West Texas Light crude oil futures on the New York Mercantile Exchange was US$95.84 per barrel, down US$8.25 or 7.9% from the previous trading day; London Intercontinental Trading The settlement price of Brent crude oil futures in September 2022 was US$99.49 per barrel, a decrease of US$7.61, or 7.1%, from the previous trading day. After two days of sharp upward adjustments, international oil prices fell sharply again on July 12, with WTI and Brent both falling to the lowest settlement prices for front-month contracts since April this year. Obviously, the current market concerns about crude oil demand are still rising. Affected by this, cost-side support weakened, causing the PTA market to show a downward trend.
Data source: Jin Lianchuang
Secondly, PTA’s cost-end support is slightly loose
The recent sustained correction in crude oil has made cost support slightly looser. Preliminary data from May show that the total OECD commercial oil inventory is 2.68 billion barrels. Although it is 253 million barrels less than the same period last year, it has increased by 10.5 million barrels per day compared with April. Data from the American Petroleum Institute showed that U.S. crude oil inventories, gasoline inventories and crude oil inventories all increased. As of the week of July 8, U.S. commercial crude oil inventories increased by 407.2 million barrels, an increase of 4.8 million barrels from the previous week, gasoline inventories increased by 2.9 million barrels, and crude oil inventories increased by 3.3 million barrels. Against the background of a slight rebound in inventories in the short-term crude oil and cost product oil markets, U.S. President Biden will embark on his first trip to the Middle East since taking office this week and will devote himself to lobbying the leaders of the Organization of the Petroleum Exporting Countries (OPEC) to increase oil production. to lower gas prices. Oil prices fell to a three-month low, dragging down PTA’s cost focus.
Finally, the demand side has not recovered well, and market transactions are not ideal for the time being.
Entering July, Hengli Petrochemical’s 2.5 million ton unit and Fuhai Chuang’s 4.5 million ton unit were overhauled as planned. The supply volume shrank significantly, and factories were reluctant to sell due to tight supply. This resulted in a sharp strengthening of the futures-to-cash basis, from 200 in early July. Yuan/ton rose to a maximum of 650 yuan/ton. However, downstream demand is in the off-season, polyester and terminal demand are weak, and factory inventory pressure is high. The sluggish demand will bring certain negative effects to the PTA market. As the weather turns hotter, some polyester factories have implemented production cuts one after another. The polyester load has dropped to 79%, and the terminal weaving operation has dropped to 50%. With the introduction of the power restriction policy, some downstream factories still have load reduction expectations.
Since the beginning of this year, the polyester market, especially polyester filament inventory, has seen an obvious and continuous accumulation of inventory. From June to now, the inventory of short fiber and bottle flakes has also shown a continuous accumulation of inventory, and the terminal weaving link has recently been in Jiangsu and Zhejiang regions. Construction will continue to fluctuate at a low level due to high temperature and power rationing. There is a certain negative feedback on the upstream PTA market. Under weak demand, PTA spot prices may continue to weaken.
Generally speaking, in the short term, due to the continued weakness of the macro economy, as well as the sharp correction of the cost-end focus and the sluggish recovery of demand, prices have fallen sharply. The recent fluctuations on the cost side are still the main logic of market transactions. In the medium and long term, we also need to pay attention to the release of new production capacity in the second half of the year and the improvement of the supply and demand margin.
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