[Introduction] After experiencing an unusual year in 2020, with the end of the New Year’s Day holiday, PTA ushered in a high rise at the beginning of the year, and expectations for a positive market situation suddenly became stronger. The spot price of PTA has climbed from 3,595 yuan/ton at the end of 2020 to 3,700 yuan/ton. In less than a week, the spot price of PTA increased by 2.92%. Next, the downstream terminal market is facing holiday maintenance and demand is slowing down. Whether the increase in the beginning of the year can be sustained and whether the polyester and weaving market prices can enter the upward channel as expected after the Spring Festival will be our next focus.
Source: Longzhong Information
The recent rise in PTA has been clear. First of all, from a cost perspective, Saudi Arabia unexpectedly announced at the OPEC+ meeting that it would voluntarily reduce production by 1 million barrels per day in the next two months, offsetting the impact of small increases in production by Russia and Kazakhstan. Crude oil performed relatively strongly. As of January 5, the Brent price rose to US$53.60/barrel. On January 6, the PX price followed the trend and rose to US$681/ton. The cost side is still the key factor supporting the sharp rise in PTA prices.
Secondly, the current PTA processing fee remains at around 450 yuan/ton, and the compression of processing fees once again verifies that the increase in PTA is due to the help of the cost side and the market and funds. Caused by looking too much. Due to the mismatch between supply and demand of PX and PTA, PX production will be relatively limited in 2021. Therefore, PX prices and processing margins have increased due to the improvement of the cost side and the weakening of its own inventory. Therefore, the PX supply and demand pattern in January is still impressive, and PX processing fees are expected to be Continue to expand upward. Then with the further commissioning of PTA equipment, the compression of PTA processing fees will lead to healthy development of the market.
Finally, from the demand side, although local energy conservation, emission reduction, and power rationing policies appeared in Jiangsu and Zhejiang regions in December 2020, Jiabo enterprises are basically operating at full capacity. , most downstream orders can be maintained until the end of January. Judging from the orders, it is enough to support the current start-up of downstream weaving factories. It is expected that some factories will continue to have holidays in mid-January, while a few are considering continuing until early February. Downstream terminal dyeing plants are approaching the end of the year, and they mainly receive urgent delivery orders. Most companies are expected to have their holidays around the end of January. However, the current operating capacity of downstream polyester factories remains at 88.94%. Since the polyester load picked up in the second quarter, the average operating capacity has been above 85%, and the downstream polyester inventory is within a relatively reasonable and controllable range. Strong support from short-term demand is the driving force behind PTA’s upward trend.
Recent PTA enterprise installation updates
Source: Longzhong Information
Overall, the current vaccine progress is relatively smooth, and cost support still exists. At present, PTA companies did not perform much maintenance and load reduction in January, and PTA’s new production capacity in the first quarter was nearly 8.2 million tons. PTA social inventory is expected to be nearly 4.8 million tons in January. The state of high production capacity and high inventory will continue throughout 2021. If costs continue to help, processing fees will obviously need to continue to be compressed and PTA prices will continue to rise. The short-term PTA market may continue to be more volatile due to cost assistance. However, judging from expectations of weakening supply and demand, the upside space is limited.