In recent times, the downstream polyester and terminal loom industries have experienced low demand during the Spring Festival, which has caused a big blow to the PTA market after the holiday. As of February 21, the average PTA processing fee remained at 261 yuan/ton, which was more than half of the 580 yuan/ton at the end of January. It has now fallen below the lower edge of the safe boundary of processing fees, and most companies are in a state of loss.
However, with the arrival of the end of February, affected by geopolitical frictions and US-Iran negotiations, crude oil rebounded sharply, driving the cost focus of PTA to rise. In the short term, under the background that the downstream and terminal markets have not yet fully recovered, the market’s transaction logic is still on the cost side.
The situation between Russia and Ukraine continues to heat up, and oil price risks and fluctuations have intensified
Affected by recent geopolitics, the volatility of crude oil continued to increase at the end of February, mainly due to concerns about the deterioration of the situation or energy supply risks. Because Europe relies on Russia for 30% of its crude oil and 40% of its natural gas imports, if there is a problem with energy supply, other countries will not be able to effectively make up for it in the short term.
The current Iraqi Energy Minister stated that the current supply and demand of the crude oil market is balanced, and OPEC+ does not need to increase oil production faster; a research report will be received on March 7 before deciding on the next step in OPEC+. Therefore, under the current background of high oil prices, the current focus of the market is still on the impact of the situation in Russia and Ukraine on the supply side of crude oil, and whether the later EU sanctions will affect Russian crude oil exports.
Taken together, there are many external uncertainties in the near future, and the risks of crude oil market fluctuations have intensified, which will have a greater impact on the cost side of PTA.
Most companies have suffered losses
The probability of enterprises jointly restricting production in the later period is relatively high
As PTA processing fees show a cliff-like decline, the probability of enterprises jointly limiting production in the later period is relatively high.
Judging from the device load, since 2022, the 3.6 million-ton device of Yisheng New Materials 2 was put into operation on January 28, and the device load was close to 50% in early February. Considering that the 2 million tons unit of Yisheng Ningbo and the 3.6 million tons unit of Yisheng New Materials No. 1 were respectively overhauled and reduced in load, the pressure on the increase in supply-side production capacity was offset in stages. However, the downstream polyester market in February was basically under pressure during the Lantern Festival. Only then did they really return to the market, and there was a certain lag in actual procurement of demand. The Jiangsu epidemic affected the resumption of work of local downstream companies, resulting in the market accumulation pattern still continuing, but the extent has narrowed slightly.
If PTA processing fees will remain low after March, the probability of major domestic manufacturers jointly reducing burdens is relatively high. It is reported that Yisheng Chemical’s 2.25 million ton unit is scheduled to be overhauled in March. In the later period, the focus will be on the load situation of enterprises under low processing fees. Supply-side impacts.
Market demand has not fully opened up after the holiday
The market awaits further verification
After the Spring Festival, the polyester and terminal markets have not yet fully recovered, resulting in insufficient demand-side momentum and a drag on PTA. In the first week after the Spring Festival, although some downstream polyester companies and terminal companies gradually resumed work, as of February 10, the equipment operating rate of the terminal loom industry after the Spring Festival remained at 21.75%, down 20.27 percentage points from before the Spring Festival. After the Lantern Festival, the operating rate of terminal loom industry equipment continued to rebound, and as of February 17 it had rebounded to about 50%.
The comprehensive operating rate of polyester has returned to more than 90%, which is a new high since May 2021. As of the 18th, the inventories of various downstream polyester varieties continued to rise month-on-month, terminal orders were not obvious, purchasing enthusiasm was weak, and polyester inventories increased. With the recovery of polyester production companies, some companies will usher in a stocking cycle, but whether it can boost the raw material market remains to be verified.
At present, the main logic of PTA market transactions is still the cost side; in the medium and long term, if it remains in the context of low processing fees, the probability of major manufacturers jointly reducing burdens and pressures is relatively high. With the downstream polyester market and the terminal loom industry It will gradually pick up, and changes in market supply fundamentals will also become the focus of later transactions, but we must also pay attention to the impact of external uncertainties.
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