PTA inventory pressure continues

After breaking through 4100 CNY/ton in the intraday on January 14, PTA entered an oscillating downtrend mode. On January 25, the PTA2105 contract dropped to 3,852 CNY/ton in intraday trading. Although PTA still has some support from the cost side, the maintenance of polyester plants increased before the Spring Festival holiday and the pressure to increase the supply of PTA still exists. The intensified contradiction between supply and demand will cause PTA to operate on a weaker side.

　　The scope of polyester maintenance continues to expand

　　 In late January, the 2.25 million tons/year facility in Yisheng Dalian, which was operating at a reduced load, and the overhauled Fuhai Chuang’s 4.5 million tons/year facility, resumed normal operation, and the domestic PTA plant started again to over 90%. Although the 2 million tons/year plant of Yisheng Ningbo Line 3 was shut down for 15 days for maintenance on January 24, half of the 2.5 million tons/year capacity of Fujian Baihong’s new plant has been commissioned on the afternoon of January 21. High-quality products will be produced on the 24th, and the other half of the production capacity is expected to be put into production in early February. The domestic PTA supply pressure is still relatively high in the later period. As of January 29, the daily operating rate of domestic PTA devices was 87.73%, an increase of 6.37 percentage points from the previous low; the domestic PTA daily output was about 136,900 tons, an increase of 16,100 tons from the same period in 2020.

　　As the Spring Festival holiday approaches, the usual pre-holiday maintenance surge of polyester equipment in previous years continues, and the scale of equipment involved in maintenance continues to expand. The latest data shows that as of January 27, the domestic announced polyester plant maintenance plan involves an annual production capacity of 9 million tons, of which the annual production capacity of the polyester plant under maintenance is 7.46 million tons, and in 2020 On December 31, 2015, the annual production capacity of the maintenance plan and the annual production capacity of the polyester plant under maintenance were 6.92 million tons and 3.07 million tons, respectively. The increase in the number of polyester plants that are shut down for maintenance has led to the recent decline in the start of polyester end plants, and the demand for PTA was weak before the Spring Festival. As of January 28, the start of polyester plant was 78.11%, an increase of 5.23 percentage points from the same period in 2020, and a decrease of 7.21 percentage points from the high point at the beginning of the month; domestic polyester production was approximately 135,400 tons per day, an increase of 17,100 compared with the same period in 2020 Ton.

　　Processing fees are further reduced

　　 Due to the significant expansion of domestic PTA production capacity in 2020 and the long-term operation of the domestic PTA, the substantial increase in domestic PTA supply will cause the domestic PTA inventory to remain high for a long time in 2020. Entering 2021, PTA stocks are still high. As of January 29, the domestic PTA social inventory was 3,953,600 tons, a substantial increase of 1,973,600 tons over the same period in 2020; the PTA futures warehouse receipt inventory of Zhengzhou Commercial Exchange was 1,868,400 tons, a substantial increase of 1,712,700 tons over the same period in 2020. Under the influence of PTA supply pressure in the later period but weaker demand performance before the holiday, domestic PTA inventory may once again enter a state of accumulation, and continued high inventory pressure will continue to suppress PTA prices.

　　 In late January, the continuous decline in PTA prices led to further compression of its processing fees. Since January 18, it has fluctuated around 400 CNY/ton. At the stage of substantial expansion of production capacity, due to the difficulty of downstream demand to keep up with the increase in supply, the reduction of PTA processing fees is basically a “fixed” thing, but the processing fees of about 400 CNY/ton are already lower than most of the market’s production time. The processing fixed cost of early devices, even for the latest generation of devices put into production, the current processing cost has already approached its fixed cost, which indicates that the space for further compression of PTA processing costs in the later period is relatively limited.

　　 With the possibility of a deep decline in international oil prices and the oscillating operation of PX prices, PTA is still supported from the cost side in the near future. As of January 29, the domestic PTA processing fee was 345.57 CNY/ton, a decrease of 380.17 CNY/ton from the same period in 2020.

　　 From the perspective of both supply and demand, the domestic PTA supply is expected to further increase under the influence of the restart of the device and the commissioning of new production capacity. On the demand side, with the increase in overhaul of polyester plants, the performance weakened. Before the Spring Festival, the PTA supply and demand situation was weak. With the contradiction between supply and demand expected to intensify, PTA inventory pressure will continue to be suppressed. On the whole, we believe that although there is still some support on the short-term cost of PTA, the weakness of its own fundamentals will make the overall trend of PTA weak before the Spring Festival.