At present, PTA prices continue to rise and have reached the highest point since October 2018. PTA spot stocks are destocked, and the basis difference is strong. At the same time, some companies at the spot level increased their advance receipts for June at the beginning of the month. The market responded quickly to the rise in PTA prices.
As PTA prices rise, downstream polyester faces greater pressure, and the pressure to “guarante supply and stabilize prices” increases again.
Affected by crude oil supply, the tight PX situation is difficult to improve
Continuing high oil prices have troubled the United States, and OPEC has changed its route to increase production after pressure from the United States. But in reality, although the production increase reaches 50%, the production increase quota is allocated by member countries, not by large oil-producing countries such as Saudi Arabia. Under the previous production increase quota, OPEC+ small and medium-sized oil-producing countries have not yet exhausted the quota, so the increased quota may be difficult to actually implement, which will eventually lead to worse implementation. In addition, this production increase is mostly on paper and difficult to implement. At the same time, after this increase in production, it will be difficult for the United States to continue to exert pressure in the short term, and OPEC+’s actual increase in production is limited; while Russia’s supply is almost certain to decline, so the tight supply of crude oil will continue, and oil prices are expected to remain high.
Due to the overall low start-up load in Asia, PX has been in a tight state since April and continues to be destocked. After entering May, the peak travel season in the United States has arrived, fuel prices have continued to rise, and the demand for oil blending has suddenly increased, which has opened the arbitrage window for oil blending raw materials in North America and Asia. Some of the raw materials used to produce PX are shipped from Asia to the United States. The market generally believes that the demand for oil adjustment will increase, and both Asian PX production and domestic imports will decline significantly, resulting in an intensification of the tight supply and demand pattern of PX. At the same time, crude oil prices continue to rise, causing PX prices to continue to hit new highs.
The processing gap of PTA has been compressed, and the high export volume will continue.
Due to high raw material prices, the PTA processing gap continues to be compressed, and the willingness of PTA factories to start up continues to weaken, currently below 80%. In May, the output lost due to monthly equipment maintenance exceeded 1.75 million tons, which was a significant reduction on the production side. The current trade model of processing supplied materials also stimulates PTA manufacturers to export PTA, and the suspension of overseas acetic acid factories also makes overseas PTA factories face the dilemma of having no rice to cook. This has caused PTA export volume to continue to increase and has repeatedly challenged PTA export records. The market currently believes that the high export volume of PTA will continue. Judging from the PTA supply and demand balance sheet, the losses on the supply side and the increase in export volume have significantly benefited the supply and demand side of PTA, which has offset the bottom line of downstream demand. PTA maintained a destocking volume of 100,000-200,000 tons in June. Overall, PTA supply is positive, hedging demand is sluggish, and PTA destocking continues.
The polyester load is low and is at the relative “bottom”
Currently there are insufficient terminal orders, which makes terminals less willing to purchase. Although raw material prices have risen rapidly recently, driven by the mentality of buying up rather than buying down, production and sales have increased, but the continuity is doubtful. The easing of the domestic epidemic and the intensive introduction of “stabilizing growth” policies have increased market confidence. However, considering the arrival of the traditional off-season, the improvement of the polyester market is expected to depend on the order situation during the “Golden September and Silver Ten” periods. In addition, taking into account various factors such as social responsibility, there is insufficient room for the load of polyester factories to continue to decrease. It will remain at a level of 75%-80% in June, which has shown a relative “bottom”. Overall, the polyester load is low and at a relatively “bottom” level, and the future is promising.
To sum up, the fundamentals of PTA are still strong and there is still room for improvement. At the same time, driven by strong costs, although the polyester load is low, it has reached a relative “bottom”. Therefore, we believe that PTA should maintain an overweight allocation and recommend downstream Polyester companies cherish every opportunity for correction, rationally use PTA futures and options for hedging, and do a good job of “guaranteing supply and stabilizing prices” to reduce corporate operating risks.
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