Recently, PTA futures prices have rebounded slightly while crude oil has stabilized and rebounded. The May futures contract has received strong support at the 4,300 yuan/ton line. The author believes that with the central bank announcing a comprehensive RRR cut and economic growth and downstream consumption expected to stabilize, a “policy bottom” has emerged; at the same time, the current situation of large-scale losses in the upstream has laid a “market bottom” for market prices. Under the joint support of the “double bottom”, PTA has very limited room for decline, but there may be considerable room for upside.
PTA production capacity maintenance volume exceeded 10 million tons in December
From the cost side, PTA has strong support. On the one hand, based on the general price on December 6, the PX-naphtha price difference has narrowed to 149 US dollars (131 US dollars based on FOB Korea). The PX industry has suffered serious losses, and the domestic PX load has dropped to 68.5%. Peripheral devices have also experienced load reductions to varying degrees. The probability of PX prices continuing to decline has decreased, and the space for PTA cost compression is very limited. On the other hand, the price of acetic acid has skyrocketed this year. Based on the current price increase of acetic acid, steam, electricity and packaging bags, which is around 6,000 yuan/ton, the current PTA processing cost is at least above 500 yuan/ton. However, the processing fee calculated based on the current price is only 200-250 yuan/ton, which means that the entire PTA industry is currently in a state of serious loss.
Against this background, PTA factories have successively announced maintenance plans since last week. The current December maintenance plan includes 2.5 million tons of Fujian Baihong Petrochemical, 2.25 million tons of Hengli Petrochemical, and 2.5 million tons of Honggang Petrochemical and Yiyi Petrochemical have been stopped to reduce their load. Shanda Chemical produces 6 million tons, involving a production capacity of more than 10 million tons.
The picture shows the PTA maintenance plan in December
In the spot market, PTA basis spreads have strengthened rapidly recently. The main reason is that mainstream suppliers’ December contracts are executed at 40%, spot liquidity has tightened, and after TA prices fell, traders and factories have certain replenishment needs.
There are expectations for improvement in the downstream trend
The main reason for the previous decline in PTA was not only the sharp drop in oil prices, but also the weakness on the demand side: under inventory pressure, some mainstream downstream polyester factories jointly reduced production by 25%. Affected by this, the polyester load dropped to around 85%. , the weaving load dropped to around 64%, both at low levels. But judging from the current situation, the probability that the downstream polyester load will continue to decline is low. After the Spring Festival, as the finished product inventory of polyester factories declines, the load of polyester factories is expected to rebound, which will have a certain positive impact on the 2205 contract.
In terms of terminals, terminal raw material inventories and gray fabric inventories are both at relatively low levels, and downstream stocks are still expected to be replenished after the year. If the downstream begins to replenish its reserves, a bottom-up positive feedback will be formed, which will have a more lasting effect on the market.
The picture shows the start of polyester production
PTA supply and demand balance sheet
In the fourth quarter, from the perspective of production capacity deployment, due to the impact of the epidemic, funding and other issues, it is unlikely that the new upstream PTA production capacity will be launched before the delivery of the 2205 contract, while the downstream polyester still has nearly 2 million tons of new production capacity. There is a certain mismatch between supply and demand downstream. In addition, from the perspective of current inventory, social inventory is 2.6 million tons, which is not high, equivalent to 20 days of polyester consumption. In the case of low processing fees in the upstream, the downward space of PTA futures prices is extremely limited. With the implementation of upstream maintenance in the later period, the inventory in December will decline more than expected, and the destocking range is expected to be around 150,000 tons.
To sum up, PTA is currently in a state of “no end”. After a short-term bottom oscillation, it may usher in a rebound trend in the future. Buying on dips is a better investment strategy.
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