In the first half of the year, international crude oil prices continued to rise, with an increase of up to 57%. The price of PX in the Asian market has increased by up to 69%, which is significantly higher than the increase in international crude oil. It has directly led to the accelerated rise in PTA prices in early June.
Driven by the surge in upstream crude oil and PX raw material prices, the price trend has skyrocketed, with PTA hitting a new high since the outbreak of the epidemic in 2020. The increase reached a peak of 34%. Cost support has driven up the price of PTA, and once crude oil prices fall, the cost support for PTA prices will inevitably be weakened.
Recently, cost support has weakened significantly. The Federal Reserve raised interest rates by 75 basis points more than expected. The market has been disturbed by negative macroeconomic conditions. Oil prices are under pressure due to expectations of demand setbacks. At the same time, with the increase in PX supply, the stage of PX hype may have ended. PX prices rose to the high point since 2014 and then declined rapidly. PTA has fallen sharply recently, with the main contract falling by more than 1,000 points from its high point, a drop of 12.55%.
Does the next driving force for the rise still exist? Will the weak demand masked by the rising market eventually feed back into PTA prices?
There are still several large installations waiting for maintenance in the future!
PTA supply may continue to be destocked in the short term
Judging from recent weeks, the 2.2 million-ton unit of Yisheng Petrochemical was shut down for maintenance on June 11 and is scheduled to last for 15 days; the 2-million-ton unit of Yisheng Hainan was shut down for maintenance on May 27 and restarted on June 12; The 6 million ton chemical plant was operating at 70%; the load of Yisheng New Materials’ 6.6 million ton plant was reduced to 80% on May 23; the load of Fuhai Chuang Petrochemical’s 4.5 million ton plant was reduced to 70% on May 26 and on May 30 The operation has dropped to 50%, and the load has been increased to around 80%. The 750,000-ton unit of Yadong Petrochemical will be shut down for maintenance on June 18 and is tentatively scheduled to last for 7-10 days.
However, there are still several large equipment waiting for maintenance. The production capacity base of the planned maintenance equipment is large, and the market supply is expected to continue to decrease.
Hengli Petrochemical’s 2.5 million tons of PTA5# plans to shut down for technical transformation and maintenance from July 2, which is expected to take 20 days;
Hengli Petrochemical’s 2.2 million tons of PTA3# annual maintenance is scheduled to start on July 23, and the estimated time is 14 days;
Fuhai Chuang’s 4.5 million ton unit plans to shut down for maintenance in mid-July, which is expected to last for one month.
In terms of fundamentals, PTA’s own supply and demand has not been the dominant factor in price operations. However, under the planned maintenance of PTA equipment, supply is expected to decrease, which still supports the market. However, the current operating rate of downstream polyester remains high, and the immediate demand for replenishment is still stable. Therefore, the PTA market supply may maintain a destocking pattern in the short term.
However, in the long term, in the first half of the year, PTA equipment underwent a large number of maintenance and load reductions while processing fees continued to be low. The decline in operating rates made PTA supply in a tight state. However, entering the second half of the year is the off-season for traditional maintenance, and devices that have been extensively overhauled in the early stage will face pressure to restart after the overhaul is completed. In addition, during the decline of the overall PTA industry chain, the decline in PTA prices is smaller than the decline in upstream raw materials and the PTA processing fee is more likely to improve. The willingness of PTA equipment to proactively reduce load and undergo unexpected maintenance will weaken. Rising operating rates will increase the supply of PTA.
The negative feedback from weak terminal demand has not affected PTA
Pressure from supply-demand imbalance borne by polyester factories
From the perspective of PTA production capacity, according to the production plan, it is planned to add 10.8 million tons of PTA production capacity in 2022. In addition to the 3.3 million tons of production capacity currently put into production in February, the remaining 7.5 million tons of production capacity will be gradually put into production in the fourth quarter. The commissioning of a large amount of new production capacity will also increase the pressure on PTA supply.
In the first half of the year, the domestic epidemic spread in many places, especially in East China, which led to the closure of many clothing markets and the obstruction of express logistics in some areas. In addition, major exhibitions were also stranded due to the epidemic, causing trouble to many fabric companies. The market demand in the terminal weaving industry continues to be weak, and its impact will last throughout the year. The epidemic situation abroad is still severe, the situation in Russia and Ukraine has intensified, and foreign trade orders are mostly insufficient. The operating rate of the terminal weaving industry is significantly lower than in previous years.
Although the operating rate of downstream polyester is lower than in previous years due to the decline in orders from terminal factories, the magnitude is relatively small. The negative feedback of weak terminal demand has not further affected the upstream of PTA, but the pressure of supply and demand imbalance has been borne by polyester factories. The supply of polyester is high and the demand is declining. The unmatched upstream and downstream production operations have led to a surge in pressure on polyester raw materials. In addition, polyester production and sales have been weak, with average production and sales less than 50%. Polyester product inventories have increased rapidly. It is understood that FDY and DTY inventories are currently around 30 days, and POY inventories are around 25-26 days, both of which are much higher than normal levels in previous years. Under the pressure of high inventory, polyester prices are difficult to rise simultaneously with upstream raw materials, and polyester filament and staple fibers have been in a state of loss for a long time.
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