Recently, PTA futures have continued to rise sharply, hitting a new high since October 2018. What causes PTA prices to strengthen? What impact will it have on the textile industry chain?
Dong Dandan, chief researcher of CITIC Futures Energy and Chemicals, said that the strengthening of PTA prices is mainly due to the following two reasons: “First, the price of crude oil, the source of the entire energy and chemical products, has made an upward breakthrough. The entire overseas market is currently in the post-epidemic period of compensation. consumption period, so global oil consumption is still on the rise, which has relatively strong support for crude oil prices. When crude oil prices rise, PTA, a downstream derivative, also rises. Secondly, the direct raw materials of PTA The price of PX is also relatively strong, which leads to a significant increase in the cost of PTA, and PTA passively follows the increase.”
What impact will this PTA price increase have on industrial production? Wei Zhehai, an analyst at Yongan Futures, analyzed that this may cause certain obstacles to the resumption of production of downstream textile companies. Wei Zhehai said: “Because the inventory of textile companies is relatively high this year, their cash flow situation is relatively not so good. In this process, on the one hand, demand may not be able to keep up, and on the other hand, during the normal resumption of production , PTA is an important raw material, and the rapid rise of raw materials may lead to a relatively large discount in confidence in the future, which will have a certain impact on the recovery of the entire downstream industry.”
Dong Dandan suggested that polyester companies and textile companies downstream of the industrial chain can use PTA futures for risk management. “Even if crude oil is rising, there will be adjustments in the process. If the crude oil price adjusts and drives PTA back down, we believe that polyester companies can still use PTA futures for hedging to avoid the risk of prices rising again in the future.” Dong Dandan said.
At present, processing fees are still at a low level. In terms of PTA, although the absolute price performance has been strong recently, it has more passively followed the upward trend of the cost side, and the processing difference has continued to be compressed below 200 yuan/ton in mid-to-late May. The serious losses led to an increase in equipment load reduction and maintenance plans. Due to shrinking supply, the processing difference was restored to around 350-400 yuan/ton at the end of the month. In early June, with the recent continuous surge of PX, the theoretical processing difference of PTA was once again compressed to a low level. In terms of polyester staple fiber, as some preliminary maintenance equipment has been restarted one after another, the supply of short fiber has rebounded month-on-month, while the operating rate of downstream spinning mills has fallen slightly due to high inventory and low profits. Under the weak supply and demand situation of short fiber itself, the price is difficult to keep up with the increase of the main raw material PTA, and the processing gap also continues to be compressed below the cost line of 800-900 yuan/ton. Looking into the future, short-term supply and demand are in a relatively balanced state. There is not much room for downward compression under the current low processing fees, but there is also a lack of upward repair drive. In the later period, we may need to see an unexpected recovery in end-use clothing and textile demand or a significant drop in costs, before the processing gap of related varieties is expected to rise.
Will PTA prices continue to rise? Wei Zhehai said that it may be difficult for crude oil prices to fall sharply in the short term. As a downstream derivative of crude oil, PTA prices will be difficult to turn downward in the short term. Wei Zhehai said: “In the absence of an obvious shift in overseas refined oil products, a sharp decline in PTA may not be seen for the time being. At present, with the return of domestic PX device supply, domestic PX factories may have some say in the return , PX prices may ease in the future, but the entire price center may remain at a high and volatile level, at least in the next one-month cycle.”
From the perspective of downstream textile enterprises, the following factors are still “stumbling blocks” on the way for textile enterprises to destock: 1. So far, although the resumption of work and production of textile, printing and dyeing, clothing and other enterprises in Shanghai and coastal areas such as the Yangtze River Delta and the Pearl River Delta has accelerated comprehensively, , but it will still take a long time for export and domestic sales orders to recover; 2. The spinning processing fee itself is not high, the increase in yarn prices is far less than that of raw materials, and we will also face price games with weaving and fabric companies; 3. Entering the second half of 2022 , the cash flow pressure of textile companies continues to rise. Yarn sales do not accept credit, account terms, acceptances, and domestic letters of credit, etc. Cash is required (with a slightly larger discount), and terminals can only choose to buy as they go to replenish their inventory.
Judging from the survey, most small and medium-sized textile factories believe that with the initial victory in the domestic fight against the epidemic and the national economic stabilization measures, the darkest moment of the textile and clothing industry has passed, but it will still take a long time to bottom out and rebound.
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