In just over half a month, everything from crude oil to PX to PTA encountered a “Waterloo”. Yesterday, PTA futures contracts almost fell to the limit across the board. A reporter from Futures Daily observed that due to the dual negative impact of costs and consumption, the PTA futures contract was running weakly across the board in early trading on Wednesday. As of the midday close of the day, multiple major and non-main PTA futures contracts fell to their limits.
Demand continues to weaken, and the scale of downstream production cuts expands
Regarding the phenomenon of multiple PTA futures contracts falling to the limit, Pang Chunyan, an analyst at SDIC Essence Futures, explained that the price of Brent crude oil fell sharply on Tuesday night, falling below the US$100/barrel mark, which has a direct drag on the price of PTA futures; also as a raw material, PX Prices have also continued to fall sharply in the past two days, and PTA’s cost focus has shifted downward.
“The drop in crude oil prices has not repaired the profits of chemical products, but has increased the wait-and-see mood in downstream purchasing. After the centralized procurement in Japan and South Korea, the price of PX dropped sharply to 1,217 yuan/ton, and the price difference between PX and naphtha also shrank to Within US$300/ton.” Chen Sheng, an analyst at Guomao Futures, said that the cost side of PTA has lost support, coupled with the continued weakening of summer demand, coupled with the impact of macro sentiment, the price has weakened significantly.
From the consumer side, the industry is currently in the off-season. From terminal weaving, printing and dyeing to polyester, all operations are at a low level. Recently, due to the high temperature in the south, electricity consumption is at its peak. Some downstream enterprises in Zhejiang Province have received power restriction notices, exacerbating the negative impact on the consumer side. feedback.
According to market participants, some polyester companies and downstream textile printing and dyeing companies in Hangzhou, Shaoxing, Haining and other places in Zhejiang have recently received notices of power cuts. A major polyester bottle flake manufacturer in East China with an annual output of 1.2 million tons has recently reduced its production by 30% due to power cuts. .
“Power restrictions have a greater impact on the production load of downstream companies, and polyester companies also plan to continue to reduce production by 10% to 15% in the near future, that is, to expand the scale of production cuts on the basis of the original 30% production reduction.” Chen Sheng said that the polyester factory Downstream customers have been notified in advance to expand production cuts and benefit from shipments. Overall shipments were good last weekend. At present, mainstream polyester factories have confirmed that they will expand production cuts. However, power restrictions in Jiangsu and Zhejiang have caused a larger-than-expected reduction in downstream weaving production, and the situation of low downstream production and low demand may intensify.
Pang Chunyan told the Futures Daily reporter that the current operating rate of downstream weaving and texturing is only about 50%. If the impact of power restrictions further declines, upstream polyester sales will be difficult to see a turnaround in the short term, and high inventory pressure will still be difficult to alleviate. In her view, negative feedback from the bottom up of the industrial chain may continue to drag upstream.
“At present, the load of both polyester and terminals has dropped to a historical low for the same period. Considering that the previous power cuts had limited impact on the polyester industry chain, when the load was originally low, the power cuts brought by this time The impact is not very big, and it may have a certain impact on bottle flakes, which are currently operating at a high level.” Zhu Lihang, an analyst at Zheshang Futures, said that at present, the market’s focus on demand is reflected in the intensity and time of joint filament production reductions. Pay attention to whether inventory can be effectively removed. In his view, it is still difficult to improve the demand side until the problem of high polyester inventory is resolved.
The reporter noticed that as PTA prices fell, the basis continued to strengthen. Although PTA maintains a high basis, there is less spot circulation, and traders’ inventories are low, the market has been unable to bear the current high price of PTA. Except for a few traders and factories, the market demand for replenishment is weak. Yesterday, relevant people in the industry reported that some leading PTA companies began to sell goods on the market this week and register warehouse receipts on futures.
“When spot sales are difficult, some PTA factories register spot goods as warehouse receipts for futures delivery, which puts greater pressure on the market. The premium of the front-month contract relative to the far-month contract gives PTA factories better hedging space and profits. Space.” Chen Sheng said that previously, spot liquidity was tight and the basis trend was strong, but at present, downstream and traders are not convinced by the high basis, and transactions are limited. “Against the backdrop of a sharp drop in absolute prices, it is difficult for spot prices to survive solely on the strength of major manufacturers.”
Under the influence of many factors, PTA prices may return to the “4th era”
In fact, judging from the price trend, in the first half of 2022, the PTA price of the polyester industry followed the oil price at a rapid pace, and the 2209 contract exceeded the high of 7,700 yuan/ton since September 2018 for the first time. However, recently, it only took a month for PTA prices to return from “7 times” to “6 times” and then back to “5 times”. What the market is concerned about is, how long will it take to return from the “5th era” to the “4th era”?
In this regard, Pang Chunyan explained that the rise in PTA prices in the first half of the year was more affected by the rising costs of crude oil and PX. During this period, the processing gap of PTA was severely squeezed many times, and its price trend mainly passively followed the raw materials. This round of decline is also largely affected by falling costs. In her opinion, whether PTA prices continue to fall, we must focus on the trend of upstream raw materials, especially oil prices.
“Judging from the guiding role of raw materials in each upstream link, oil prices will not be interfered by the polyester industry. It can be said that it has relatively strong pricing power over PTA and determines the absolute price center of PTA. In the PX link, an oil adjustment company has emerged this year. Logic, but the seasonality of this logic is relatively strong, and the sharp drop after the sharp rise will have a decisive effect on the mid-term trend of PTA prices.” Pang Chunyan said that relatively speaking, the upstream and downstream of the polyester industry chainThe contradiction between supply and demand can only play a leading role when there is no obvious directional guidance for upstream crude oil and PX.
In her view, the market outlook for PTA depends on, on the one hand, the trend of oil prices on the raw material side. PX still has some room to fall relative to naphtha; on the other hand, it depends on supply and demand, especially whether consumption is likely to recover in August.
“Based on the current situation, the cost-end oil price is still pessimistic, and the possibility of further decline cannot be ruled out. The downstream profits of naphtha are skewed, and it will be difficult to repair the subsequent naphtha cracking spread. At the same time, PX also has supply-side problems in the fourth quarter. Pressure on production, the probability of PX-N returning to below 200 US dollars/ton is not small. PTA is also under considerable pressure on production in the fourth quarter. Coupled with weak downstream demand, there is room for further compression of processing fees. Under the influence of multiple factors, subsequent PTA prices may enter ‘4 Era’.” Zhu Lihang said.
The reporter learned that under the Fed’s interest rate hike cycle, the market’s concerns about economic recession have intensified, and demand for commodities will be suppressed. In the view of market participants, the most tight stage of supply has passed, and the downward trend of commodity prices has been difficult to change.
“The recent sharp drop in raw material prices means that the production costs of downstream companies have dropped. If the logic of the industrial chain changes from high prices in the first half of the year to suppress demand to low prices in the second half of the year to stimulate demand, PTA prices may return to the ‘4 era’. “Chen Sheng said.
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