Introduction
The decline of PTA since mid-June can be explained more as the “collapse of total volume”, that is, the compression of the overall profits of the industry chain when the overall weakening is expected, and PTA has better liquidity due to the existence of futures contracts. sex, leading to more obvious price declines. In the short term, there is a certain expectation of recovery after PTA’s cash flow has experienced significant compression. With the support of its own strong reality in the market outlook, even if the industry chain and even macroeconomic sentiment weaken as a whole, PTA will show relatively resilient characteristics. The market outlook should be Mainly based on trading oversold rebounds or counter-trends when reality gradually weakens.
Since the Dragon Boat Festival holiday, PTA has experienced a “roller coaster” market. The price of the main 09 contract rose by 17.9% in 5 trading days from the low on June 2, and then fell rapidly in 8 trading days to June 24. It has fallen below the starting point. So is PTA really “going back to where it came from”? After the sharp rise and fall, what has changed in the fundamentals?
1 Profit reconstruction: superficial repair of downstream cash flow
Pay attention to the price trends of different varieties in the polyester industry chain from June to now (standardized based on the price on May 31):
Figure 1 Relative increases and decreases of various varieties in the polyester industry chain in June
Data source: Compiled by CCF COFCO Futures Research Institute
It can be seen that during the rise/fall in June, crude oil and naphtha, the most upstream of the industrial chain, were always in a weak position, and even the absolute prices were in a downward trend. After the Dragon Boat Festival holiday, driven by the demand for refined oil products in the external market, PX took the lead to strengthen, pushing PTA upward; then, although the price of PX fell back, the price of PTA fell relatively slowly under the support of its own fundamentals and the promotion of market bulls, which also supported The prices of downstream filament and staple fibers have remained relatively high; PTA has gradually accelerated its decline since last week, but the price of polyester has remained relatively strong overall.
Figure 2 Profit distribution of polyester industry chain (yuan/ton)
Data source: Wind compiled by COFCO Futures Research Institute. The profits of each variety in the figure are converted into the equivalent amount of 1 ton of PTA.
From the perspective of industrial chain profits, since June it can be seen as a process of gradual recovery of cash flow in the mid- and downstream links under the leadership of PX. At the end of May and beginning of June, only PX had profits in all links of the industrial chain, and the overall profit situation was relatively slim. Both PTA and polyester were near the break-even line. After the Dragon Boat Festival, the profit margin of PX expanded first, and gradually transferred profits to the downstream polyester end through PTA. By late June, the comprehensive profit of the polyester end had recovered to more than 200 yuan/ton. In addition to the continued strength of bottle flakes, the long-term weak filament and short fiber also showed considerable cash flow on paper.
2 The contradiction between supply and demand becomes clear: Polyester yarn profits are difficult to realize
However, such paper profits do not mean that the downstream fundamentals have really improved. On the contrary, from the perspective of supply and demand, the contradiction has become clearer. Since mid-May, with the recovery of the epidemic and the expected weakening of summer demand, the overall operating load of the downstream weaving and texturing links has begun to turn downward after a weak recovery, but the polyester end has been stimulated by speculative demand driven by stronger upstream Maintain operating levels. The difference in downstream loads prevents the produced polyester products from flowing smoothly downstream. In addition to a wave of strong production and sales brought about by the post-Dragon Boat Festival promotions, the polyester yarn production and sales rate remained below 50% in mid-to-late June, and polyester yarn inventory continued to accumulate. Hit another record high. At this time, the contradiction on the polyester end became increasingly clear. The seemingly beautiful profits on paper could not be realized smoothly, and the increasingly severe inventory pressure needed to be solved by reducing the volume or price.
Figure 3 Polyester yarn production and sales rate in Jiangsu and Zhejiang (%)
Data source: Wind compiled by COFCO Futures Research Institute
Figure 4 Average inventory of polyester yarn (days)
Data source: Compiled by CCF COFCO Futures Research Institute
3 PTA: own support and total collapse
For PTA, its own fundamental performance is still relatively strong. After experiencing capacity clearance in 2020-2021, PTA’s overcapacity is not serious. Supported by the still high export demand, supply and demand at the near end of PTA are still relatively tight. Even though PTA’s load has rebounded recently, stimulated by the recovery of cash flow, PTA’s social inventory is still at a low level before downstream demand weakens significantly, and the possibility of significant inventory accumulation in the short term is still low. It can also be seen from the spread structure that the real side of PTA remains strong after the sharp rise and fall, and the pattern of near strength and far weakness has not changed, but the expectation of forward marginal weakness has strengthened.
Figure 5 Changes in PTA price structure (yuan/ton)
Data source: Compiled by CCF Wind and COFCO Futures Research Institute
The decline of PTA since mid-June can be explained more as the “collapse of total volume”, that is, the compression of the overall profits of the industry chain when the overall weakening is expected, and PTA has better liquidity due to the existence of futures contracts. sex, leading to more obvious price declines. In the short term, there is a certain expectation of recovery after PTA’s cash flow has experienced significant compression. With the support of its own strong reality in the market outlook, even if the industry chain and even macroeconomic sentiment weaken as a whole, PTA will show relatively resilient characteristics. The market outlook should be Mainly based on trading oversold rebounds or counter-trends when reality gradually weakens.
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