With the commissioning of Hengli Petrochemical’s new equipment, PTA supply has reached a new level, while downstream polyester has limited production and reduced burdens due to declining cash flow. The contradiction between supply and demand in the PTA market has escalated, and the center of gravity of PTA futures prices may shift downward again.
PTA new production capacity released
Recently, the price difference between PX and naphtha has fallen to a low of below US$150/ton, and the profits of the industrial chain have been transferred to the downstream. At present, PTA spot processing fees are at a good level of 600-700 yuan/ton. In this context, PTA factories are more willing to operate at full capacity. In the past month, most devices have been operating normally, and the average operating load of the PTA industry has reached 88%. In mid-July, Jiaxing Petrochemical’s 2.2 million ton unit began to implement the maintenance plan. Before the end of the month, only Yisheng Ningbo and Sanfangxiang are expected to have maintenance. The steady operation of new production capacity will make up for the lack of this part of production capacity. The market is still expected to be slightly overstocked in July. .
From May to June, new polyester production capacity was released intensively, which rigidly digested part of the PTA inventory. The PTA social inventory remained at 3.5 million to 3.6 million tons. However, with the recent commissioning of Hengli No. 5 unit, the domestic PTA production capacity base has climbed to 55.19 million tons, and market supply pressure has increased again. Although the early planned maintenance of the equipment may be postponed to August, under the current background of good processing fees, the possibility of further postponement of the shutdown by the manufacturer cannot be ruled out. With the expectation that Hengli’s new equipment will be put into operation and Xinfengming’s new production capacity will be put into operation in the third quarter, the surplus situation in the PTA market will be difficult to change.
Poor terminal demand
The terminal textile market under the new coronavirus epidemic has become the most severely damaged link in the industrial chain. Weaving companies have started operations since the beginning of the year The rate has been hit repeatedly, and changes in domestic and overseas epidemics have affected the order volume of terminal companies. Although overseas operations have resumed for about two months, consumption of non-essential goods such as textiles and clothing has still not picked up as the epidemic has not yet been brought under control.
Since the second quarter, low prices in the polyester market have triggered a pulse-like production and sales peak, while gray fabric inventories continue to rise, thus restricting the increase in the operating load of weaving companies. Since early June, the weaving operating rate has dropped all the way after reaching 70%, and has recently remained at a low level of around 61%, down 14 percentage points from the same period last year.
Compared with the weaving industry, the operating rate of polyester factories is much higher. Since July, the average operating load of polyester factories is about 87%, which is slightly lower than the same period last year by 3 percentage points. The mismatch in operating rates will inevitably lead to another accumulation of inventory in the polyester segment. Recently, filament POY, FDY and DTY inventories are at highs of 21 days, 19 days and 32.5 days respectively, an average increase of 5-6 days from the previous month. At the same time, filament cash flow All have turned negative. Recently, some polyester factories have introduced production reduction plans, but most of them are small and medium-sized enterprises. The average operating rate of polyester factories has only dropped by 2 percentage points from the end of June, and the overall scale of production reduction is limited. We are still in the off-season for traditional textile and apparel demand, and the pressure on the polyester market continues. If the demand recovery in the later period is not strong, or more polyester devices join the ranks of production restrictions, the market improvement will need to be driven by terminal demand.
In short, the current poor terminal demand has been transmitted to the polyester link. The polyester market has dropped, and coupled with the increase in PTA supply, PTA social inventory will continue to accumulate, and the center of gravity of PTA futures prices will also move downwards under pressure. </p
