In the second half of July, as oil prices rose, supply was tight, and the peak season was approaching, the bullish atmosphere in the PTA market increased, and prices soared. The 2109 contract pushed up from 5,200 yuan/ton to above 5,600 yuan/ton. Riding on the rise of polyester raw materials, the polyester filament market has also ushered in a long-awaited period of growth.
However, since August, the trend has changed suddenly, and the direction of the polyester market does not seem to be going smoothly. As the cost side of crude oil since late July, its gratifying rise seems to have stopped in July. Oil prices have been falling all the way, and the main Brent October contract fell below 70 US dollars per barrel. This trend pattern has fully demonstrated that crude oil has turned bearish again. Similarly, PTA, as a “suffering brother”, once again followed the decline of crude oil and turned downward. At the same time, polyester filament, which had risen together with PTA earlier, has recently put down its arrogant attitude, ended the continuous price increase, and began to return to the weekly price reduction promotions from April to June. Starting from the 5th, many polyester raw material manufacturers in Jiangsu and Zhejiang have clearly lowered their raw material prices by 50-100 yuan/ton.
The peak season is approaching, and the style of the polyester market has suddenly changed! What went wrong?
There are expectations of tightening in crude oil
Price will continue to dominate the PTA market direction
Due to poor profits, PTA has been significantly dominated by cost this year, and PTA operates close to cost most of the time. In mid-to-late July, boosted by multiple positive factors, PTA accelerated its rise and the processing difference expanded. However, the excessive processing difference has also become the main factor limiting the rise in PTA prices. Since August, as oil prices have weakened and the processing gap has shrunk, PTA has accelerated its adjustment. In the future, after the PTA processing gap returns to a low level, it will once again passively follow the fluctuations of oil prices, and crude oil prices will continue to dominate the market direction of PTA and polyester.
The drop in cost-side crude oil is likely due to the following reasons. First of all, the Delta virus is raging around the world, and crude oil demand and global economic recovery expectations are full of uncertainties. At the same time, the epidemic has spread across China recently, and some medium and high-risk areas have re-implemented traffic control measures, which has also had a certain impact on commodity transportation. Secondly, there was an unexpected increase in U.S. crude oil inventories, and the news stimulated a downward trend in oil prices. As OPEC+ has always maintained a cautious attitude to control the supply of crude oil, there are expectations for further tightening in the crude oil market.
Figure 1: PTA industry chain operating rate
Data source: WIND, Guohai Liangshi Futures Research
Some polyester products exist Oversold phenomenon
The epidemic is the biggest negative factor at the moment
According to the industry Institutional surveys show that this year’s textile and apparel consumption continues to recover both at home and abroad. There are currently orders for the polyester peak season in the second half of the year, but profits are lower than in previous peak seasons. Especially under the influence of the current epidemic, the tightening of epidemic prevention policies and restricted logistics have significantly suppressed the demand for PTA. In addition, due to the slower issuance of crude oil import quotas than in previous years, the supply of raw material PX is limited, and the operation of new PTA equipment is unstable.
Judging from the research, some polyester factories are not optimistic about the market outlook, and some polyester products are oversold. The production of texturing enterprises continues to operate at full capacity, and processing profits continue to increase compared with last month. Warp knitting enterprises are also operating at full capacity. They have started to produce more autumn and winter fabrics, and raw materials are in stock in about two weeks. However, orders are average and products are not shipped smoothly, resulting in gray fabric inventory accumulating again, mostly in two months. Although there is a peak season expected in the second half of the year, the current overall profits of the industry chain terminals are mediocre, and enterprises have limited enthusiasm for stockpiling. Therefore, the periodic surge in PTA prices has caused the maintenance and load reduction of downstream polyester equipment. As a polyester raw material, the price growth at this position has been weak.
PTA factory contract reduced again
Can it support the polyester market?
Recent market news: A mainstream supplier has adjusted the August PTA contract supply: from 80% to 50% supply; or maintain 80% supply, with volume and price retained, but Some shipments have been delayed until September. The overall PTA market supply is currently tightening, and the overall contract supply of major manufacturers declined in August. The recent overall equipment maintenance plan is relatively intensive, and some larger equipment are undergoing load-reducing maintenance. It is expected that the overall maintenance losses in August will not be low. The decline in crude oil is expected to suppress the short-term processing fee of PTA. The current PTA processing fee has dropped from the peak of 881.12 yuan/ton to 720.73 yuan/ton.
Figure 2: Trend of PTA processing fees
Data source: WIND, Guohailiangshi Futures Research
If crude oil continues to fall, PTA processing fees will fall further. The current inventory is within the normal range year-on-year. Although the polyester production start-up remains around 87.54%, the demand for PTA is maintained. However, the terminal market transactions are weak and the demand for polyester is relatively average. The textile market outlook is facing severe epidemic situation, soaring sea freight and trade frictions. Under the negative influence, the trend is not optimistic yet. In the later period, we need to pay attention to the upward transmission of polyester and weaving loads to the PTA raw material end, as well as the increase in terminal textile and apparel orders. </p
