After experiencing a weak November, the PTA market has digested the negative news recently and finally ushered in a rebound. According to price monitoring, PTA has recently experienced a rebound trend after falling for eight consecutive weeks. On December 13, the average market price of the domestic PTA market in East China was 4,712 yuan/ton, a year-on-year increase of 34.68%.
This PTA rebound has given a strong boost to the already tired market. On the one hand, market concerns about the impact of the mutated Omicron strain on the global economy and fuel demand have eased, coupled with the Organization of the Petroleum Exporting Countries and its allies (OPEC+) controlling production, it is unlikely that Iranian oil will return to the international market in the near future, and the oil market remains tightly balanced. Oil prices at the cost end have gained support. On the other hand, it is inseparable from the dual help of the Ningbo epidemic and domestic overhaul.
Ningbo epidemic coincides with domestic overhaul
PTA welcomes strong rise!
Recently, the epidemic situation in Zhejiang has become urgent. Currently, Ningbo has launched a level I emergency response, and Zhenhai District has implemented temporary closed management. From 2:00 on December 7, 2021, Zhenhai District launched temporary closed management. It has been a week now, and the epidemic has not yet been completely controlled. Ningbo is an important port city on the southeast coast of China and the economic center of the southern wing of the Yangtze River Delta. Ningbo Zhoushan Port’s annual cargo throughput ranks first in the world, and its container volume ranks among the top three in the world. Zhenhai District has the largest liquid chemical terminal in the country, with an annual throughput capacity of over 5 million tons. In addition, it also has the largest refining and chemical company in the country, Zhenhai Refining and Chemical, with an annual oil refining capacity of 25 million tons and an ethylene production capacity of 1 million tons. The sudden epidemic in Ningbo also had a certain impact on PTA.
Zhejiang Province has the largest PX and PTA production capacity in the country. Among them, the PX production capacity in Ningbo and Shaoxing is 2.25 million tons, and the PTA production capacity is 11.75 million tons, accounting for 7.73% and 17.72% of their respective total production capacities. At present, the PX unit has not been greatly affected, but the 3.6 million-ton unit of Yisheng New Materials in the PTA unit dropped to 50% on December 5 and 30% on December 9 due to logistics constraints.
The recent epidemic in Ningbo coincides with the major maintenance of domestic PTA. With the shutdown of Fujian Baihong, Yadong Petrochemical, and Hengli Petrochemical Line 2 for maintenance, the current domestic PTA load has been significantly reduced to 70%. Zhuhai BP and other companies still have maintenance plans in the future. Therefore, The operating load will also tend to decline. The supply side has contracted significantly, and coupled with the recent rebound in international crude oil, the cost side and supply side have supported the rise in PTA prices.
Ningbo Port is one of the important chemical ports. The biggest impact of the epidemic on the polyester chain is logistics and transportation. The Zhejiang market may face a short-term mismatch between supply and demand.
Due to the low processing fees in the PTA industry, some companies installed equipment for maintenance in December, and the epidemic in Zhejiang has continued to reduce the burden of Yisheng New Materials. As a result, the supply and demand of PTA has improved. Currently, the PTA operating rate is 71.20%, the maintenance capacity is 19.34125 million tons, and the polyester operating rate is 81.33%. The decline in the PTA operating rate is higher than the decline in the polyester operating rate. In December, the inventory may change from inventory accumulation to destocking. The short-term PTA trend is strong.
Polyester and weaving experienced double decline
Downstream demand may face a double blow
While the epidemic has restricted PTA, it has also dealt a double blow to downstream demand. The polyester filament production capacity in Zhejiang accounts for more than 70% of the country’s total production capacity, while Ningbo, Shaoxing, and Xiaoshan account for about 28% of the country’s total production capacity. Among them, texturing companies in Ningbo are relatively concentrated, while circular knitting machines, printing and dyeing companies in Xiaoshao are concentrated. Relatively concentrated, there are currently polyester filament manufacturers in Ningbo that have reduced production, and other companies have also expressed that they are considering reducing their workload based on the epidemic situation.
At the end of November, some polyester companies in Jiangsu and Zhejiang reduced production to protect prices. Although early-stage shutdown devices in Jiangsu and Fujian were restarted one after another in early November, and industry starts increased slightly, the current polyester market in Jiangsu and Zhejiang is flat, prices still maintain a downward trend, and overall production and sales are average. The operating load is around 80%. Most warp knitting factories have been affected by the lack of terminal orders and high unsaleable inventories of gray fabrics, so they have reduced their production capacity, generally to 30% to 50%, and in some cases the price is as low as around 20%. We haven’t heard of any local best-selling fabrics, and the stock of gray fabrics is still mainly upward. The accumulation of gray fabrics squeezes cash flow. Considering that winter orders have ended, spring orders are sparse, the Spring Festival is approaching, and epidemics at home and abroad are recurring, polyester supply and demand will experience a decline in both supply and demand, so the industry’s operating rate is still expected to decline.
Taken together, PTA factories are currently experiencing increased production cuts and maintenance, and rising crude oil has provided greater support for PTA costs. However, the weakening of terminal orders has suppressed the enthusiasm of loom production, and the demand side only purchases raw materials to meet the demand.Need comes first. Therefore, in the short term, PTA prices will continue to rise slightly.
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