Since the beginning of this year, the prices of crude oil and PX at the cost end of PTA have continued to rise, and the price of the auxiliary material acetic acid has increased significantly, squeezing the profits of PTA factories. Under the low-profit market, the number of equipment in the industry undergoing maintenance has increased, and some equipment have even started to shut down for a long time. At the same time, on the demand side downstream of PTA, the operating rate of the polyester industry continues to remain at a high level. Amid the mismatch between supply and demand, the PTA market has entered the destocking channel since March.
However, since mid-July, due to the closure of the Yangtze River and other factors, the mainstream supply of goods in the main port area has been in short supply, the PTA basis has continued to strengthen, the price center has increased, and the overall profit of the PTA industry chain has pick up. So, under the production expansion cycle, how long can the improvement in the supply and demand pattern of the PTA market last?
PTA industry profits rebound as basis strengthens
This year, due to the high absolute level of inventory and the continued suppression of processing fees, PTA basis has been declining for most of the year. is in negative value. However, the PTA basis has strengthened significantly recently, and the current and futures structure has gradually changed from a high premium in the far month to a discount structure in the far month.
“Currently, the supply and demand pattern of the PTA industry chain continues to improve, with some spot supplies in short supply and prices rising.” Tianfeng Futures analyst Liu Siqi pointed out that although the PTA industry is still in the production cycle, the newly added PTA in the first half of the year The production capacity has reached 5 million tons. However, the backward production capacity of PTA that has been eliminated since this year has exceeded 5.4 million tons. Combined with the factors of large-scale maintenance of production equipment, the maintenance losses on the supply side are relatively high. Against the background of capacity expansion, PTA continues to destock.
Market research data shows that the current social inventory of PTA has dropped by more than 1.4 million tons compared with the peak period, and the number of PTA futures warehouse receipts on the Zhengzhou Commercial Exchange is also declining.
In mid-July, due to the closure of the Yangtze River due to Typhoon “Fireworks”, mainstream suppliers had difficulty in arriving goods. Mainstream PTA supplies in Zhapu and other places were in short supply. Spot prices rose sharply and the basis continued to strengthen. As spot prices continue to strengthen recently, the overall profit of the PTA industry chain has rebounded.
“Last year, new equipment in the domestic PTA industry was put into production on a large scale, but demand was affected by the epidemic, which caused a large increase in supply in the PTA industry chain. The processing fees of both PX and PTA links were at historically low levels. At the beginning of this year, with the With the launch of PTA production capacity, the PX supply and demand pattern has changed, the industrial chain profits have transferred from PTA to PX, and PTA’s own profits have been pushed to a lower position.” Zhu Lihang, an analyst at Zheshang Futures, said that before this round of price increases, PTA’s production profits It ranges from 400 yuan/ton to 600 yuan/ton. Recently, due to the continuous improvement of the supply and demand pattern, PTA production profits have recovered, and the PTA spot processing fee has risen to about 800 yuan/ton. In addition to the rebound in PTA and PX profits, profits at the downstream polyester end of PTA have also rebounded to a certain extent.
Liu Siqi said that downstream demand has shown a “mismatch in off-peak and peak seasons” this year. Before the Spring Festival, the market had good expectations for this year’s demand. A large number of orders were placed, weaving factories increased stockings, and the polyester industry maintained high profits and low inventory. After March, the terminal’s “peak season is not prosperous”, and the stocking of raw materials has declined. Although the polyester end maintains a certain profit, production and sales are poor, and it is difficult to convert profits into cash flow. Entering the second half of the year, when the inventory of downstream raw materials was at a low level in the early stage, purchases in the market increased and the cash flow of polyester companies improved. Overall, recently, the profits of the PTA industry chain have rebounded across the board.
However, in the view of industry insiders, the recovery in profits of the PTA industry chain is in line with fundamentals, but there is still a certain gap between expectations and the accumulation pattern at the beginning of the year.
It remains to be seen whether the tight supply situation can be sustained
The shortage of PTA supplies is a key factor affecting recent market trends. Looking at the entire market, the PTA production capacity in Zhejiang is 18.35 million tons, while the polyester production capacity in the region reaches 29 million tons. Therefore, there is a large gap between supply and demand in the PTA market in Zhejiang. “Due to the equipment maintenance of enterprises such as Reignwood in Zhejiang, the market has continued to destock since March, and there are very few goods left in PTA delivery warehouses in Zhejiang. Previously, due to weather effects, port unloading has slowed down, and polyester factories have an urgent need for replenishment.” An industry insider said.
In this regard, Liu Siqi also said that since March, the number of PTA warehouse receipts in Zhejiang has dropped rapidly from the peak of nearly 270,000. At the end of May, PTA warehouse receipts in Zhejiang have basically been written off, and downstream factories have The reservoir area’s dependence on spot goods has increased. Affected by Typhoon “Fireworks” in East China, the flow of some mainstream goods from Zhejiang into the reservoir area has slowed down, and spot goods in Zhapu and other places are tight.
It is understood that in mid-July, affected by the typhoon, the price of PTA rose sharply, rising by more than 400 yuan/ton in a few days. In previous years, typhoons would also cause shipping closures to main ports in East China. Usually when the overall inventory of PTA is not high, shipping closures caused by typhoons can easily trigger market prices.
“During 2018~2019, typhoons triggered flight closures, and PTA prices also rose sharply. In 2020, due to high PTA inventories and weakened demand caused by the epidemic, typhoons did not have any impact on the PTA market. There is an obvious impact.” Liu Siqi said that the impact of the flight closure this year is mainly reflected in the difference between reality and expectations. The supply of the PTA market was originally sufficient, but equipment maintenance caused PTA to continue to destock, and typhoons triggered flight closures, which intensified the tight supply pattern, which in turn triggered a recent wave of market prices.
Since then, with the end of the typhoon and the opening of the port, the partial tight supply of PTA has been alleviated to some extent.
“In terms of PTA fundamentals, PTA may still maintain a tight supply situation in the third quarter.” Liu Siqi said that judging from the current supply and demand pattern, the supply-side equipment maintenance volume will still remain stable from July to August. On the high side, there will be no new PTA equipment put into production in China in the second half of the year. Demand side terminal order�Data rebounded slightly, new polyester equipment was put into production one after another, and the polyester operating rate remained above 93%. In the third quarter, PTA may continue to destock. At present, the fundamentals of the industrial chain are improving, and in the short term, we can expect a strong market pattern for PTA.
“It is expected that the PTA supply and demand pattern will be generally benign in the third quarter.” An industry insider said that before demand weakens, the contradiction between PTA supply and demand will not be particularly large, and profits will have a certain resilience. There are still certain peak season expectations in the fourth quarter, but the core lies in whether the high operating rate of the polyester industry can be maintained in the third and fourth quarters. This is the key to determining whether PTA supply and demand can maintain a tight balance in the second half of the year. Otherwise, there is a certain accumulation of inventory expected in the fourth quarter, and there will be certain constraints on PTA’s relatively high processing fees.
However, Zhu Lihang said that he should still be cautiously optimistic: “PTA continued to destock in the first half of this year, on the one hand because the operating rate of the polyester industry was significantly higher than normal periods in previous years, and on the other hand because export volume increased significantly. This has reduced the supply pressure. But in fact, the pressure on the PTA supply side is still high, and there are still several large domestic PX and PTA equipment to be put into production in the future. In the short term, if the export volume cannot be sustained, PTA may return to the inventory accumulation cycle. , the rebound in profits will also slow down the elimination of small and old devices to a certain extent. Therefore, under the background of still great pressure on the supply side, the overall rebound in profits of the industry chain may not be sustainable.</p
