Inventory situation: In early February 2020, PTA social circulation inventory rose rapidly before futures inventory. After April, the increase in futures inventory exceeded the increase in circulation inventory. As of May 12, PTA warehouse receipt inventory was 1.0563 million tons, close to the level of 1.11 million tons in the same period of 2017. If the forecast volume of warehouse receipts is included, it has exceeded the level of the same period in 2017.
High inventory driven analysis: Affected by the new coronavirus epidemic in 2020, the downstream demand for PTA started less than expected. The growth in supply has led to a rapid accumulation of inventory. The weakness of the basis is deepening, and the basis of 180-200 yuan/ton is more attractive for the flow of spot stocks into futures.
Later-term inventory expectations: Under the circumstances of high PTA production (above 90%) and limited recovery of polyester (lower than 88%), PTA inventory is running at a high level. The weakening PTA basis and the lack of short-term delivery restrictions will continue to divert some circulating inventory, and futures inventories continue to rise and exceed the level of the same period in 2017. Unless a stronger basis causes outflows from futures inventories, pressure on futures inventories will tend to increase under a weak basis.
Trading strategy: Although futures stocks will divert some circulating stocks driven by weak basis, this is a stock transfer rather than actual digestion. We believe that the crude oil rally is currently on hold, and PTA has returned to the dominant supply and demand situation after cost support has weakened. However, due to high inventories, high operating costs, and high processing fees, PTA continues to sell short on highs, with the upper pressure focusing on 3600-3700 yuan/ Ton.
PTA total inventory reached a new high, and futures inventory was close to the high of the same period in 2017
In early February 2020, when demand started to fail to grow as fast as supply, PTA began to accumulate inventory rapidly. Social circulation inventory rose rapidly before futures inventory. After April, the increase in futures inventory exceeded the increase in circulation inventory. As of May 8, PTA circulating inventory was 2.488 million tons, and PTA warehouse receipt inventory was 1.0563 million tons on May 12. The total PTA inventory is expected to exceed 3.5 million tons, a new high since 2015. It is expected that PTA inventory will remain high before the end of May.
Futures inventory reflects the size of net short positions, and the negative basis pattern is the prerequisite for short selling. Since 2015, more than 90% of PTA futures have been in a net short position. And when the basis weakens, the size of the net short position expands. The degree of negative basis from 2015 to 2017 was greater than that from 2018 to 2019. The increase in selling demand caused the futures inventory in 2015 to 2017 to be higher than that in 2018 to 2019. In March 2020, After the month, as the basis weakness deepened, PTA’s net short positions surged and futures inventories rose rapidly due to a surge in selling orders.
The basis reflects the supply and demand pattern. In a state of excess supply and demand, the PTA basis is in a state of futures premium. Currently, under the expectation of high PTA inventory and substantial expansion of PTA production capacity, the basis trend in the later period will be similar to the long-term negative value from 2015 to 2017. Therefore, before the weak basis pattern is reversed, PTA futures will be one of the ways for spot companies to maintain value. Especially since the basis difference exceeded 200 yuan/ton since March this year, it has become more attractive to futures sellers. Compared with the period of high futures inventory, Looking at the basis, the current basis is lower than the same period in 2015 but higher than the same period in 2016 and 2017. Therefore, the driver for the transfer of spot inventory to futures still exists.
Unlike the 2017 PTA futures inventory high in March, this time the inventory high occurred in May. From January to March 2017, net short positions expanded unprecedentedly. In February, the average daily net short positions were 480,000 lots, and once exceeded 510,000 lots. The scale of warehouse receipts during the same period hit a record high, with a maximum value of 261,500 lots, corresponding to futures inventory. About 1.3076 million tons; the net short position initially increased in March 2020, and the net short position expanded again from mid-April to May. The average daily net short position since May is 313,600 lots, which is higher than the average daily net short position in April of 238,600 lots. scale. At the same time, net short positions in 2017 were mainly concentrated in the May contract, while current net short positions are mainly in the September contract. Therefore, unlike the May 2017 contract, where futures inventories gradually fell after the contract entered the delivery month, this year’s futures with high inventories have no delivery restrictions in the second quarter. Unless the basis strengthens and futures inventories flow out, futures inventory pressure will be difficult under weak basis. untie.
On the surface, the weakening basis has led to a surge in futures inventories. In essence, strong supply and weak demand have led to a substantial accumulation of spot stocks, making futures a way to preserve the value of spot stocks. Last week, PTA circulating inventory accumulated again, rising to 2.488 million tons, setting a new high in circulating inventory since 2015.
Supply pressure continues unabated. On May 12, the domestic PTA load was 90.9%, higher than the same period in 2017, with 2.2 million tons in Xinfengming and 1.2 million in Zhongtai Chemical. After new units such as 2.5 million tons and Hengli Petrochemical 4#2.5 million tons were put into operation, the PTA production capacity base rose to 52.39 million tons, and the supply of PTA increased significantly under high production capacity and high load. In May, Liwan’s 700,000 tons and Hanbang’s 700,000 tons production capacity were shut down for maintenance, and Hainan Yisheng’s 2.2 million tons production capacity was planned for maintenance in June. However, Hengli Petrochemical’s new equipment is still scheduled to be put into operation in the middle of the year, and the overall supply is still increasing.
From January to April this year, polyester production capacity increased by 1.75 million tons.��Corresponding to an increase in demand for PTA of about 1.5 million tons, the planned production of 750,000 tons from May to June is equivalent to an increase in demand for PTA of about 640,000 tons. Overall, it is still less than the increase in PTA supply this year. The epidemic has exerted a greater drag on the textile and apparel industry. Although the domestic market advantage has recovered, export orders have decreased. Therefore, although the polyester load has improved month-on-month, it is still lower than the same period in the past two years. It is currently only around 83%-84%, and the downstream weaving load is also less than 60%. With strong supply and weak demand, PTA spot market demand is insufficient, and downstream inventory replenishment ends around May Day. High inventory in the later period can only continue to be transferred to futures.
Oil prices have risen and entered an oscillation range, and the cost boost has weakened
In May, international oil prices rebounded slightly, driven by the benefits of production cuts and expected recovery in demand. Last week, Brent fluctuated around US$30/barrel and WTI fluctuated around US$26/barrel. , the overall price focus has increased compared with the end of April. After the short-term oil price rebounded, it entered a state of range oscillation. However, the current oversupply and demand are still difficult to completely reverse, and there is a “ceiling” for the upward price. The upper pressure of WTI is expected to be around US$30/barrel, and Brent is expected to be around US$36/barrel.
Short-term positive drivers: First, OPEC+ production cuts are gradually realized. From May 1 to May 5, Russia’s total crude oil production was close to the country’s promised production target of 8.5 million barrels per day; U.S. crude oil production began to show a downward trend, with the average weekly production on May 1 being 11.9 million barrels, a decrease of 200,000 barrels from the previous week. A year-on-year decrease of 300,000 barrels. According to the production reduction agreement, OPEC member countries need to reduce production by 7.47 million barrels per day from May to June. The current production reduction intensity is still far behind the target, but the increased cooperation of oil-producing countries in production reduction under low oil prices will help achieve the target. achieved. Second, demand is expected to improve. China’s resumption of work is fully advancing, and Europe and the United States have successively announced plans to restart their economies. Travel demand will first improve oil consumption and refinery operations will pick up (the U.S. refinery operating rate rose to 70.5% in early May, and the crude oil processing volume of China’s main refineries in April (a month-on-month increase of 7.13%), and the inventory pressure of crude oil and oil products improved (U.S. gasoline inventories decreased by 3.16 million barrels month-on-month). It is expected that short-term improvement in supply and demand will continue to provide bottom support for oil prices.
Medium-term pressure still exists: on the one hand, the relationship between crude oil production cuts and oil prices may change. Low oil prices in the early stage stimulated production cuts, but as oil prices rebound as production cuts deepen, high oil prices will once again stimulate production increases. The current production reduction agreement mainly binds OPEC member states, while the U.S. production reduction is basically a market-regulated behavior. Prices above US$30/barrel will attract the recovery of shale oil production (Diamondback, Parsley, Centennial Resource and other shale oil companies have stated Production will increase if oil prices rebound). Last week, the U.S. Texas crude oil regulator decided to abandon OPEC-style production quota cuts and rejected the motion to reduce production. Therefore, if oil prices rebound sharply, shale oil production without agreement will restart. On the other hand, the improvement in demand is based on the alleviation of the epidemic. If the resumption of work leads to a second outbreak of the epidemic, demand may return to lows.
The short-term driver is mainly to repair the cost increase caused by rising oil prices. After the cost repair driver weakens, the difference in PTA trends will revolve around the supply side. In the case of high inventory and high construction, the trend of PTA is easy to fall but difficult to rise.
The trading strategy is still mainly bearish
In summary, Under the circumstances of high PTA production and limited recovery of polyester, PTA inventory is running at a high level. The weakening PTA basis and the lack of short-term delivery restrictions will continue to drain some circulating inventory. Unless a stronger basis causes outflows from futures inventories, pressure on futures inventories will tend to increase under a weak basis.
PTA currently has the “three high” characteristics of high inventory, high start-up, and high profit (spot processing fee is about 700 yuan/ton, and futures main processing fee is more than 800 yuan/ton) continued. In terms of operation, the short selling trading idea will continue on rallies. The early short orders can be continued. The upper pressure will focus on 3600-3700 yuan / ton. </p
