International oil prices frequently experience extreme trends. On the 9th, Brent crude oil fell by more than 17%. The possible easing of the Russia-Ukraine conflict and expectations of increased supply from various organizations have led to changes in market sentiment. Downstream chemicals are all following cost changes. After removing the cost factor, the market is increasingly worried about the emergence of negative demand feedback.
On the 10th, PTA closed down to 6,024 yuan, while staple fiber and EG fell 5.09% and 4.38% respectively.
Extreme commodity prices occurred frequently in March. The market witnessed 80% of the super market prices in a single day for natural gas and London Nickel. Even oil prices fluctuated around US$10 a day. However, it is not surprising that crude oil suddenly plummeted US$26 from a high in 12 hours. It is surprising and reflects the extremely unstable investor sentiment recently.
Currently, oil prices are rising rapidly, but downstream products are unable to keep up, and processing profits are being squeezed. Even PTA’s theoretical processing fee turned negative, which has never happened in history. PTA processing fees have been performing poorly after the Spring Festival. Starting from the end of February, the three major suppliers have announced production cuts. Although this action caused the PTA basis to strengthen, the processing gap failed to repair as expected by the market. The reason for this result is that the price increase at the cost end is too strong, while the downstream demand is weak, the upstream and downstream are in a state of serious tearing, and the profits of intermediate products are continuously squeezed. Not only PTA, but also PX, ethylene glycol, filament, staple fiber, etc. are all in a loss situation.
Some analysts believe that due to time mismatch in the short term, negative processing fees will not have much impact on the actual operating conditions of the company. But as time goes by, cost pressure will become more prominent. Long-term losses will definitely force the supply side to start maintenance, and large-scale production cuts and shutdowns are very likely to happen in the future.
At present, the maintenance of PTA equipment is gradually becoming clear. Some of Yisheng’s equipment have begun maintenance one after another. Hengli also has maintenance plans from March to April. Fuhaichuang also reduced its load in early March. The supply side has begun to shrink, and the market has gradually begun to destock.
In terms of terminals, the start-up of terminal texturing, weaving, and printing and dyeing factories in Jiangsu and Zhejiang continued to increase slightly last week. As raw material prices continued to rise, terminal factory raw material procurement followed up during the week, and polyester production and sales increased in stages. At present, there are limited new domestic trade orders in the spring and summer, while the foreign trade market is more cautious in accepting orders due to high sea freight squeezing profits, and the overall recovery of terminal weaving demand is lower than expected.
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