At present, the strong pattern of crude oil remains unchanged, and PTA cost support is strong. Polyester inventory is backlogged, but with the increase in terminal weaving load, the oversupply contradiction is expected to be alleviated.
Strong cost support
The oversupply characteristic of the PTA industry determines that its price will run around the cost line for a long time. At present, the United States will enter an interest rate hike cycle, and commodity prices will be suppressed; the Iranian nuclear negotiations are likely to restart, and there are strong expectations for Iran’s crude oil export controls to be relaxed during the year; OPEC+ is steadily increasing production, and there is still more than 2 million barrels per day of idle production capacity , crude oil is more likely to weaken in the medium to long term.
However, the factor that affects or even dominates crude oil prices in the short term is the situation in Ukraine. Russia is the world’s three largest crude oil producer and the most important natural gas supplier, and its impact on global energy supply is crucial. Russia’s main natural gas transportation pipeline crosses Ukraine, and Nord Stream 2 is also difficult to operate due to Western sanctions. Under this situation, there is major uncertainty in global energy supply, and the strong pattern of energy prices, including crude oil, is difficult to change. Therefore, PTA cost support remains strong in the short term.
Poor terminal consumption
As of February 28, the starting loads of domestic PTA and downstream polyester were 78.04% and 91.03% respectively, which were 1.58 and 1.72 percentage points higher than the fourth week after the Spring Festival in 2021. dropped by 12 percentage points in four weeks.
In terms of PTA, the current PTA processing fee is less than 400 yuan/ton, which is at a relatively low level. As long as the cost does not collapse, the downward space for PTA prices is very limited. Due to widespread losses in the industry, many domestic PTA manufacturers underwent maintenance in early February. However, except for the two 6-million-ton units of Yisheng Petrochemical, most of them have resumed production. Most of the devices that will be shut down before 2022 will be phased out, and there will be limited resumption of production. PTA’s operating load is at a normal high level. Considering the poor overall operating conditions of the industry, it is difficult to further increase the load. In addition, the second phase of Yisheng New Materials’ device was put into operation, but because its first phase of the device was operating at reduced load, the actual increase in production capacity did not produce an increase.
In terms of polyester, the operating load of polyester is at a high level. Due to poor terminal demand, inventory has increased. As of February 24, polyester filament FDY inventory was 30.5 days, an increase of 19 days compared with the same period last year, an increase of 165.22%; polyester filament DTY inventory was 31.5 days, an increase of 12.5 days compared with the same period last year, an increase of 65.79%; polyester long Silk POY inventory is 27.2 days, an increase of 18.2 days compared with the same period last year, a rate of 202.22%. The inventory in the PTA industry is acceptable, but the inventory of polyester is high, and companies are facing greater pressure to destock.
In terms of terminal weaving, due to factors such as the epidemic in Jiangsu and Zhejiang and the difficulty of workers returning to work, the terminal weaving industry has been slow to resume work after the Spring Festival, which directly led to the backlog of upstream polyester inventory. Judging from market feedback, there are only a small number of spring and summer orders domestically, and most of them are orders before the Spring Festival. In foreign trade, due to rising raw material prices and rising sea freight, the negotiation time between buyers and sellers has lengthened, and traders’ resistance has increased. Overall, the terminal market is still in a stagnant stage, the consumption of finished goods inventory in factories has slowed down, and terminal demand is not optimistic.
To sum up, PTA has a contradiction between weak reality and strong expectations. On the one hand, PTA operating rates are high and polyester inventory is backlogged; on the other hand, weaving operations will gradually resume in the later period, and there are positive expectations for supply and demand. Based on the above judgment, we believe that PTA is not suitable for short selling at present. Although it has certain short-term and long-term value, the upside space is limited.
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