Recently, the advancement of vaccines has strengthened market expectations for improved future demand. Although the supply and demand side of PTA is still loose, the absolute price of PTA has been rising due to rising costs and enthusiasm driven by funds. It is expected that before downstream demand weakens significantly, PTA is still expected to continue the volatile and strong situation.
Strengthening crude oil is good for market sentiment
Since the end of 2020, with the rollout of COVID-19 vaccines in various countries, market expectations for future demand recovery have increased, and international oil prices have taken the lead in rebounding. WTI crude oil has risen by more than 30% in the past two months. Driven by the rise in oil prices, the closer the downstream products are to oil, the more obvious the increase will be. During the same period, the price of naphtha has increased significantly, and is currently close to US$500/ton. With the overall rise in market prices, upstream profits have recovered significantly, and the Brent-PX spread has reached $280, the highest since May 2020. Due to the rapid growth of PX production capacity in the past two years and against the background of loose supply and demand, PX processing fees have been greatly compressed. In 2020, the minimum production and processing fee for PX dropped to a low of US$120. Looking at the market outlook, PX production is relatively limited in the first half of 2021, mainly focusing on the second phase of the Zhejiang Petrochemical Plant. Compared with PTA, the production capacity growth rate has slowed down significantly during the same period. Therefore, PX processing fees are expected to be restored. At the same time, during the PX and PTA production cycles Under the mismatch, the center of gravity of PX prices is also expected to move slightly upward.
The demand side is still stimulating in the short term
Affected by the epidemic, the operating load of polyester factories in the first half of 2020 was low. Until July, the polyester industry’s cumulative Production achieved positive growth year-on-year. After the National Day, affected by macroeconomic stimulus and the cold winter, the demand market showed signs of improvement. In this round of overall rise in the PTA industry chain, the downstream market’s vigorous replenishment behavior has become a booster. As of the end of 2020, the inventories of POY, FDY and DTY were 15, 15 and 22 days respectively, which is about half of the peak inventory in 2020. The inventories of various polyester products are still in a healthy situation. In the near future, the average operating rates of polyester factories and Jiangsu and Zhejiang looms are around 89% and 76% respectively. There is still some support for PTA in the short term. It is worth noting that with the recent emergence of sporadic cases in the country, control has become stricter again, and as the new year is approaching, textile workers may gradually return home after mid-to-late January, and the downstream demand-stimulating effect will weaken.
PTA’s high inventory has become a hidden danger
The surge in PTA’s production capacity and the impact of the epidemic on downstream industries have caused the industry to continue to accumulate inventories. As of the end of 2020, PTA society Inventories have reached a high of 4 million tons. In the near future, both Sichuan Energy Investment and Zhuhai BP have restarted, and Fuhai Chuang’s maintenance equipment will also restart in late January. Fujian Baihong’s 2.5 million tons of new production capacity is expected to be launched in the near future, but the expected maintenance capacity in January is relatively limited. At present, Mainly Hanbang Petrochemical 2.2 million tons. Recently, the spot processing fee of PTA has dropped to around 450 yuan. If the production capacity of Honggang Petrochemical and Yisheng New Materials can be released as scheduled in the first quarter, there will be room for compression of PTA processing fees. Under the current processing profits, the market’s willingness to start production is still strong, because downstream polyester will face seasonal maintenance in the later period, and PTA inventory accumulation pressure is still high.
To sum up, the current phased supply and demand contradiction of PTA is not yet acute, and oil prices still provide certain support to the market. PTA is expected to continue its strong fluctuations, and attention should be paid to the pressure near 4,000. After mid-to-late January, the release of Baihong’s new production capacity and the phased maintenance of polyester factories will worsen the supply and demand relationship, and the possibility of weakening in the later period cannot be ruled out. </p
