Recently, the international situation has been complicated. When the situation between Russia and Ukraine is tense, international oil prices continue to rise. Therefore, with the strong assistance of PTA on the cost and raw material side, PTA prices have followed the trend. However, as of March 9, the military conflict between Russia and Ukraine is expected to turn around. , combined with the UAE’s call for OPEC+ to speed up production increases, international oil prices fell sharply. At the same time, the PTA market also fell back. As of March 10, PTA05 futures also fell to 6024 yuan/ton.
Cost support remains strong
Data source: Longzhong Information
International crude oil has continued to rise recently, and the international oil price once rose to around US$120/barrel. However, as of March 9, there are signs that Ukraine may recognize the status of a neutral country, and the military conflict between Russia and Ukraine is expected to turn around. In addition, the United Arab Emirates called on OPEC+ to speed up production, and the international oil price Fall sharply. NYMEX crude oil futures contract 04 fell 15 US dollars per barrel or 12.13% to 108.7; ICE Brent oil futures 05 contract fell 16.84 US dollars per barrel or 13.16% to 111.14. In mid-December 2021, the processing difference between PX and naphtha dropped to a low of US$118/ton, and the market load subsequently dropped sharply. As the operating rate of the downstream PTA link increases, the supply and demand side of PX improves, and the processing difference is significantly repaired. The current price difference between PX and naphtha has reached a high of US$250/ton in the past six months. After the Spring Festival, international oil prices surged and plummeted. The prices of naphtha and PX rose rapidly. The crack price of naphtha also rose to around US$300/ton. After the loss of PX last year, the PX end followed the oil price and increased significantly this year. Before the Spring Festival, the price rose sharply. A high of US$1,000/ton. Although nearly 10 million tons of new PX production capacity are expected to be put into production this year, the production time is mostly concentrated in the third and fourth quarters. It is expected that PX will continue to be strong in the first quarter, forming certain support for PTA prices. In the short term, PXN can still be maintained. At present, the negative impact on the PX market is relatively limited. Therefore, there is still support on the cost side of PTA.
Low processing fees force a gradual increase in equipment maintenance
Comparison of PTA processing fees and operating rates from 2019 to 2022
Data source: Longzhong Information
The PTA market price rose sharply during the 2022 Spring Festival holiday and then adjusted steadily. During the main Spring Festival holiday, severe cold weather in the United States may cause some oil wells to shut down production, and geopolitical tensions continue. International oil prices hit a new high in more than ten years. With strong support from the cost side, PTA opened sharply higher after the holiday. The average PTA processing fee in February was around 370 yuan/ton. It increased by 10.78% year-on-year and fell by 45.88% month-on-month. As the cost price further increased, PTA’s profit margin shrank. Excluding production costs, the PTA processing difference was around 150 yuan/ton. Rising costs and prices have also put pressure on PTA companies. At present, based on the industry’s average processing cost of 600 yuan, the average profit level is already negative. Oil prices have risen rapidly recently, but downstream products have been unable to keep up, and processing profits have been squeezed. As of March 9, PTA spot processing fees are at -13 yuan/ton, such a processing fee is really unexpected for industry insiders. For refining and chemical integration and large-scale equipment, the current processing fee is already difficult to make a living. It is even worse for small and medium-sized enterprises. In the short term, companies may have stocks in stock during the actual production process, but if the PTA processing gap continues to decline, PTA device maintenance will gradually surface.
The polyester load remains high and requires a firm base.
Before and after the Spring Festival holiday, polyester factories did not undergo major maintenance, and terminal demand was insufficient, and overall inventory pressure continued to increase. However, back in February, the overall load of the polyester end continued to rise, and the average weekly start-up of the polyester industry was 93.96%, an increase of 1.74% from last week. Factories have also conducted price cuts and promotions many times to release inventory pressure. From the perspective of raw materials, the cost side in March will still fluctuate at a high level in the short term and is relatively strong. On the polyester side, high costs and low profits support prices, but high inventory and low demand still inhibit its upside. According to statistics from Longzhong Information, as of March 10, the comprehensive operating rate of chemical fiber weaving in Jiangsu and Zhejiang was 66.66%, a month-on-month increase of 2.61%. Although the current tense war situation has increased export resistance, and the delay in foreign order negotiations shows no sign of improvement. However, most downstream weaving factories maintain basic operations and mainly produce regular models for inventory. In the future, weaving will also have the need to replenish supplies. Therefore, the short-term polyester load will still maintain a high load. However, we must still be wary of negative feedback caused by poor upward transmission of terminal demand.
To sum up, geopolitical issues still exist. Crude oil is expected to rebound due to geopolitical instability, and the cost side may be adjusted at a high level. From a fundamental point of view, the short-term PTA supply side is still expected to decline, and the demand side load remains high. The overall supply and demand balance in March is expected to be destocked, and the PTA market may have a limited decline.
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