After the Spring Festival, the main PTA contract once fell to the support level of 4,200 yuan/ton. After hitting the bottom, PTA rebounded slightly and oscillated upward. However, the COVID-19 epidemic has recently spread around the world, market pessimism has spread, and crude oil has fallen sharply, dragging down the trend of PTA. In the short term, the market will follow cost fluctuations and mainly adjust.
With its own supply and demand side weak, the trend of PX mainly follows that of crude oil and naphtha. Recently, affected by the spread of the epidemic, international oil prices have experienced a major correction, and naphtha and PX have also fallen. The current price of PXCFR in China is around US$700/ton, and the cracking price difference is around US$250/ton, both at the bottom of the historical trend. However, after the price fell sharply, the subsequent market sentiment has relatively eased, and the willingness to buy at low prices will also increase, which will provide certain support for the price of PX. In terms of devices, judging from the supply of PX itself, several domestic PX devices are restarting. The new devices of Zhejiang Petrochemical and Hengli are operating smoothly, and the overall load has increased slightly. Other PX devices in Asia are not expected to have much load changes in the near future. Due to the low operating rate of downstream PTA factories and the continued weak demand for PX, the overall supply of PX is in excess, with the accumulated inventory in February being around 200,000 tons.
In terms of inventory, PX social inventory is on the high side, currently around 2.5 million tons, and it is reported that some tank areas are under great inventory pressure. Overall, the current price of PX is still under pressure, but its price and processing margin are both low. It is expected that it will still follow the fluctuations of oil prices and remain low in the short term. Follow up to pay attention to the trend of crude oil and the dynamics of PX equipment.
Judging from the apparent supply and demand, the excess production of PTA in January and February was around 1.6 million tons. Under this circumstance, PTA’s manufacturer inventory and polyester factory inventory days both hit a three-year high, rising to around 9.5 days. Inventory pressure has doubled. On the one hand, some PTA manufacturers have reduced production and reduced their burden. On the other hand, it has also weakened the willingness of polyester to purchase raw materials. Even so, despite the poor transportation and logistics in the early stage and the low polyester load, PTA inventory continued to accumulate, and the storage capacity of factories and terminals was tight. The social inventory dropped to around 3 million tons, a new high in three years. Although transportation has been recovering since the resumption of work and the polyester load is gradually increasing, its progress is limited by its own supply and demand contradiction, and the digestion of excess PTA is limited. Therefore, there is an obvious oversupply of PTA in the first quarter. However, with the further resumption of downstream work, the extent of inventory accumulation is expected to narrow.
In terms of cost, due to the sharp drop in prices after the Spring Festival, the processing difference of PTA once dropped to around 300 yuan/ton. As PX continues to fall recently, the PTA processing gap has been repaired and has returned to around 500 yuan/ton, but it is still at a low level. From a profit perspective, the space below PTA is relatively limited. In the future, we need to pay attention to the trend of crude oil and the reduction and shutdown of equipment in the context of low profits.
At present, various places are resuming work in an orderly manner, and polyester production is also slowly recovering. The load has increased from 58% at the beginning of the month to about 65%. The main problems facing polyester are still the pressure caused by high inventory accumulation and whether workers can arrive on duty in time. Polyester product inventory accumulation continues, with several major products hitting record highs. This is mainly due to logistics constraints and slow recovery of terminal weaving. Overall, polyester supply pressure is still high, and coupled with restrictions on workers returning to work, the increase in polyester load is still relatively slow.
In terms of terminals, the current operating rate of looms in Jiangsu and Zhejiang has returned to 33%, and the operating rate of texturing is about 21%. The trend continues to rise, and the overall situation is improving. However, it will take some time to return to a higher operating rate. In fact, the entire industry chain will continue to face high inventory pressure and weak demand, which will be difficult to digest and resolve in the short to medium term. The market outlook will focus on the situation of epidemic control, the progress of resumption of work in various places, and the spread of the epidemic abroad.
Taken together, PTA is currently under weak supply and demand, and is under obvious pressure. However, after the previous sharp decline, PTA prices and processing differences have compressed to historical bottoms, so the space for PTA to continue downward is relatively limited. It is expected that PTA will follow the fluctuations of the cost side in the short to medium term, mainly adjusting. If the low processing difference and high supply pressure continue, it is not ruled out that some devices will reduce their load or stop production in the future. Follow-up attention will be paid to the trend of crude oil, the progress of polyester resumption and the dynamics of PTA equipment. </p