After the Dragon Boat Festival holiday, PTA futures opened higher and moved higher, with an increase of more than 1,000 yuan/ton in just a few days. After rising high last Friday, they began to fall. After a sharp rise and fall, PTA attracted special attention from the market. What contributed to the previous sharp rise in PTA? What is the current status of the upstream and downstream industrial chains? What will happen to the market outlook?
Raw material PX surges
Judging from the situation of the upstream and downstream industry chains, we believe that the recent rise in PTA is mainly driven by cost-end PX, and PTA is passively following the rise. Due to the Russia-Ukraine war, European and American countries imposed sanctions on Russia, causing global crude oil, coal, natural gas and other commodities to rise. In addition, the U.S. summer driving season is approaching, and gasoline prices across the country are at record highs.
Oil products are highly profitable, but PX production suffers serious losses. Some refineries in the United States choose to reduce PX production and adjust oil, which leads to a reduction in PX production and then purchases PX from Asia. Since May, the market has continued to speculate that PX is expected to have tight supply and demand. PX has increased by approximately US$300/ton in the past month, and the crack price difference between PX and naphtha has increased by approximately US$400/ton. The strong rise of PX drove the rise of PTA, but the growth rate of PTA was not as high as that of PX. The profit of PTA production went from break-even to a loss of 500 yuan/ton.
As for whether PX can continue to push up PTA in the future, let’s first look at the supply and demand situation of PX. From October last year to March this year, PX production profits have remained at a low level, and March to April every year is the maintenance season. Under the influence of low profits, PX equipment has been suspended or load reduction efforts have been relatively large this year, and PX production in Asia and China has started. The rates fell to historical lows for the same period in the past. The sharp contraction of the supply side also provides opportunities for speculation in oil demand.
Currently, with the significant improvement in PX production profits, PX production load has also been significantly improved. As of last Friday, the domestic PX operating rate has increased to 85.6%, and the Asian PX load has increased to 77.1%. The loads have all returned to high levels. In addition, Jiujiang Petrochemical’s 900,000-ton unit was put into operation in May and has produced products in early June. The new unit will also provide additional PX production. With the increase in PX supply, PX supply and demand in the Asian market tend to be loose under the premise that the PTA start-up load increase is limited.
Can the PX import demand in the U.S. market change the loose supply and demand pattern of PX in Asia? The highest monthly demand for PX in the United States is around 180,000 tons, while my country’s monthly demand for PX is about 3 million tons. Even if the United States imports all PX from Asia, the impact will be small and it will be difficult to change the supply and demand pattern in Asia.
Supply and demand are not optimistic
After analyzing the upstream raw material PX, let’s take a look at the situation of PTA. In the past two years, PTA production capacity has continued to increase, industry competition has intensified, high inventory and low profits have become the norm in the industry, and high-cost equipment has been forced into long-term shutdowns. Since the beginning of this year, PTA production profits have continued to be sluggish, and the operating rate has also been declining. The industry’s average operating rate has gradually dropped from 80% in January to about 73% in May. With the contraction of the supply side, the supply and demand of PTA continued to improve after the Spring Festival. However, because upstream crude oil and PX were too strong, and the downstream was suppressed by the epidemic, the absolute price of PTA increased with the upstream, and profits were not restored.
Looking forward to the market outlook, from a long-term perspective, the peak production of PTA will continue, but the production will be concentrated after the end of this year, and the pressure of new devices to start production will have a weak impact during the year. In the short and medium term, the maintenance of PTA equipment was too concentrated in the first half of the year, and the maintenance of PTA equipment may be reduced in the second half of the year, and the industry’s operating rate is expected to gradually increase.
In terms of demand, currently polyester companies are generally stuck in the predicament of high inventory and production losses. Recently, some polyester companies have begun to reduce production and load, and it is difficult for polyester’s demand for PTA to increase significantly. Therefore, judging from PTA’s own situation, it is difficult for industry profits to increase significantly, and the industry’s downturn may continue.
In summary, we believe that with the increase in PX supply, the stage of PX hype may have ended. Against the background of weak supply and demand of PTA and low profits, the price trend of PTA may return to the dominance of crude oil. In addition, we need to pay attention to PTA maintenance. , polyester and terminal weaving demand recovery process.
</p
