The basis has weakened significantly, and PTA has entered a accumulation cycle. What is the future of the market?

The PTA basis has weakened significantly recently, with the basis of the 2309 contract falling from the highest point of 800 yuan/ton this year to around 300 yuan/ton, and the basis of the 2305 contract falling from the highest point of 200 yuan/ton to around the 0 axis. This week, the premium for the 2309 contract has rapidly weakened from more than 500 yuan/ton at the beginning of the week to about 300 yuan/ton for the 2309 contract. “The reason for the sharp weakening of the basis is that futures and spot prices have fallen rapidly at the same time, and the spot price has fallen faster than the futures price.” Yuan Wei, an analyst at Shenwan Futures, said that during the May Day holiday, terminals in Jiangsu and Zhejiang increased their elasticity , weaving, printing and dyeing were partially stopped for holidays, and the load dropped to around 60%, 43%, and 64%. Texturing and weaving have restarted after the holidays. Currently, the texturing operation rate in Jiangsu and Zhejiang is 70%, the loom operation rate is 64.5%, and the printing and dyeing operation rate is 71%. “There was a lot of PTA maintenance in May, the supply of upstream PX remained tight, and the oil adjustment logic has not been falsified, so the overall spot price still has room to rise, but it may turn from the spot price rising faster than the futures price in the first quarter to a spot price rise. The speed is lower than futures.” Yuan Wei said. In fact, the sharp weakening in basis is consistent with changes in fundamentals. According to Zhu Lihang, an analyst at Zheshang Futures, since April, the load of downstream polyester has continued to decline, falling from a high of more than 90%. Most PTA devices are operating normally as profits have improved, and the second phase of the new device Jiatong Energy has also been put into operation. It’s going well, and Pengwei Petrochemical, which has been parked for a long time, is trying to restart. “Overall, the supply side continues to increase, and the negative feedback of demand has been transmitted to the polyester side. Under this situation, PTA inventory continues to accumulate, with the accumulation of more than 200,000 tons in April, especially the port inventory continues to accumulate. PTA spot prices have gradually softened from tightness in the early stage, and it is reasonable for the spot basis to weaken significantly.” Zhu Lihang explained. A reporter from Futures Daily learned that the sharp weakening of the basis reflects changes in the overall supply and demand pattern and inventory situation of PTA. The phenomenon of low circulating inventory in the early stage has been improved. “The weakening of the basis is mainly due to the increase in the overall circulating inventory of PTA.” Ma Junyi, an analyst at Dadi Futures, said that on the one hand, the recent sharp decline in 2305 contract positions has eased the overall delivery pressure, and the early suppliers have repurchased spot goods in preparation for delivery. There is some outflow; on the other hand, the load of polyester decreases while the start-up load of PTA at the raw material end is maintained, resulting in an accumulation of overall PTA inventory. In Yuan Wei’s view, the PTA basis has weakened significantly. On the one hand, it has released the market’s weak expectations for loose future spot supply. On the other hand, it has released the low operating rate of downstream polyester. Some downstream polyester factories have reduced production, and overall production and sales have been low. Strong, weak reality of poor weaving orders. This reflects that the market is still returning to the fundamentals of weak demand before the logic of aromatics oil adjustment is turned on. With the reduction of downstream production and the commissioning of upstream production, PTA’s supply and demand balance sheet will change from the previous tight balance to the overcrowded inventory in the next few months. “For the PTA market, under this expectation, the processing fees of PTA may be gradually compressed. As the benefits are subsequently reduced, unexpected maintenance may increase, and finally a dynamic supply and demand balance will be formed. It may also be due to the influence of oil adjustment logic. It is expected that the upstream raw material PX is in short supply, and the PTA factory is forced to undergo maintenance to form the final balance.” Zhu Lihang said. In Ma Junyi’s view, there are two paths for PTA to achieve rebalancing: Either the overall supply of PTA is too high and the inventory is accumulated, causing the basis and processing fees to move downwards. Factory prices and inventory pressures reduce production and stop production, so that the supply is reduced to match demand; It is the downstream that increases the operating rate driven by orders, and the increase in demand matches the supply. Overall, the first path is more likely to be implemented. “The PTA basis and processing fees are expected to continue to adjust in the later period.” Ma Junyi believes that the demand for polyester will tend to move downwards after entering the off-season. According to the current market understanding, the demand for nylon fabrics is acceptable, but the demand for polyester is generally poor. Negative feedback will affect the price of PTA. Judging from the entire export data, China’s overall export volume dropped significantly month-on-month in April, and exports from Vietnam, South Korea, etc. also declined simultaneously. The overall weakness in external demand may not form an effective feedback on polyester demand; at the same time, Asia’s PX maintenance equipment is gradually recovering, The octane number and cracking spread in the United States have dropped significantly from their high points. The overall demand for oil blending has not significantly driven the price of aromatics, so the overall PTA price has weakened. In Zhu Lihang’s view, the basis of high premiums is difficult to sustain at present. The previous basis level was too high, and there is a high probability that it will be difficult to maintain in the future. “For the current PTA, there are two main core transaction factors in the second quarter: First, the performance of the oil adjustment logic after the arrival of the gasoline peak season. Although the gasoline gap is currently declining and aromatics logistics are flattening, it is difficult to repeat Last year’s big market situation, but we still need to pay close attention to prevent extreme market conditions; the second is the reaction of the supply side after the negative feedback of demand.” Zhu Lihang believes that the current PTA processing fee is acceptable, but if the subsequent processing fee continues to be compressed, the supply side will undergo unexpected maintenance It may increase, and the supply and demand balance of PTA may change. Pay attention to the impact of changes in equipment on the supply and demand balance. If there are large marginal changes, the strength of PTA needs to be re-evaluated. Looking forward to the market outlook, Ma Junyi believes that the market needs to pay real-time attention to the impact of oil adjustment demand and polyester load changes, as well as the impact of black swan events such as typhoons on logistics and construction. These are the core factors that will affect the subsequent trend of PTA.
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