Cost and demand support, PTA may continue to run at a high level

After the Spring Festival holiday, the domestic PTA market ushered in rising prices, and prices continued to refresh. As of February 24, the closing price of PTA's main contract had reached 4,718 CNY/ton, an increase of 13.9% from the pre-holiday closing price. This rise in PTA is inseparable from the raw material crude oil and the direct upstream raw material PX. In addition, the good demand has laid a good foundation for the strong rise of the PTA market.

1. Cost support has been significantly enhanced, and supply remains stable

From the Spring Festival to the present, international crude oil has performed well. Recently, due to the cold wave weather, crude oil production has recovered slowly. The forecast of rising oil prices has boosted market sentiment. In addition, the market is generally bullish on commodities, and international oil prices have rebounded strongly. Brent 04 contract rose 2.33 US dollars to 65.24 US dollars / barrel. Crude oil boosted the price gap between PX and naphtha to pick up rapidly. After 9 months, and in the context of de-stocking, the PX processing fee in February exceeded $210/ton. It is expected that PX will continue to be de-stocked in the future. Will remain high. The PTA processing fee shows a trend of compression and is currently maintained at around 310 CNY/ton.

The output of PTA in January was 4,405,500 tons, a month-on-month decrease of 269,100 tons, or 5.76%. In January, PTA started and stopped at the same time. Because the restarting devices were mostly concentrated in the middle and late ten days, the increase in output was limited. Jiangyin Hanbang’s 2.2 million tons went into shutdown, Yisheng Dahua’s 2.25 million tons fell to 50% and resumed operation. Yisheng Ningbo shut down. Sichuan Energy Investment and Fuhai Chuang restarted one after another. At the same time, Fujian Baihong’s 2.5 million tons new installation was completed in January. On the 21st, qualified products were successfully fed.

Under the expectation of a substantial increase in production capacity, the processing range is acceptable and also stimulates the start of PTA manufacturers to maintain a high level. Since 2021, the overall average load of domestic PTA operations has remained at a high level of over 85%, and the pressure on product supply has continued to increase. As of February 22, the PTA operating rate was about 85.5%, and the PTA output in February is expected to be around 4.2 million tons. In terms of equipment, Reignwood Petrochemical’s 1.4 million tons/year device and Yangzi Petrochemical’s 650,000 tons/year device fell to 80% at the beginning of the month. It will gradually achieve full load, and the Honggang plant is also scheduled to be commissioned; Hainan Yisheng’s 2 million tons/year plant and Hengli Petrochemical’s 2.2 million tons/year plan are overhauled. Overall, the PTA supply is expected to increase in March.

As of February 22, the domestic social inventory reached 4.79 million tons, and the daily accumulated inventory was about 16,500 tons. It is expected that the overall social inventory of PTA will reach a new high of nearly 4.88 million tons by the end of February. However, due to the unexpected shutdown of the Yisheng Hainan plant on February 11, the exhausted warehouse was slightly lower than expected. In addition, the start of Honggang Phase II was slightly delayed, which is a short-term positive for the market on the supply side.

In general, crude oil is expected to run at a high level in March, and PX will also hit a new high in nearly a year. The PTA cost side support is still there; but PTA social inventory is high and new production capacity is launched in large quantities. PTA supply is expected to increase in March, which may restrict futures Upside space.

2. Demand boosts PTA upward

From the downstream demand side, most of the polyester factories fell negative before the holiday, and the changes during the Spring Festival were relatively limited; after the holiday, the terminal recovery exceeded expectations, which stimulated the efforts of polyester factories to resume production. According to statistics from Longzhong Information, the current daily output of polyester is about 140,000 tons, and it may increase to 160,000 tons in early March. Due to the encouragement of local holidays this year, the overall recovery of polyester after the holiday was earlier than in previous years. As of February 22, the average operating rates of downstream polyester and Jiangsu and Zhejiang looms were about 84.52% and 48.53% (the same period last year were 64.54%, respectively) 31%).

With the recent increase in the prices of raw materials such as PTA and ethylene glycol, the prices of downstream products have also shown an upward trend. As of February 23, the prices of polyester chips (fiber grade) and direct-spun polyester staple fibers (1.4D*38mm) They are 6300 CNY/ton, 7680 CNY/ton (up 1200 CNY/ton and 1430 CNY/ton respectively from the same period of last month), polyester filament DTY (150D/48F), FDY (150D/96F), POY (150D/ 48F) The prices were 8,950 CNY/ton, 7,550 CNY/ton, and 7,450 CNY/ton (a month-on-month increase of 1,050 CNY/ton, 1,500 CNY/ton, and 1,440 CNY/ton respectively).

Before the Spring Festival, the polyester was promoted, production and sales increased, the inventory of polyester products was at a low level, and the inventory of staple fiber enterprises continued to decrease and even was oversold for a time. When returning to the market after the holiday, terminal weaving mostly resumed work around the tenth day of the first month, while some yarn companies in Fujian resumed work around the third and sixth day of the first month. Therefore, it is expected that the terminal demand will continue to improve and the polyester factories are still optimistic. On the whole, it is estimated that the polyester output in February will be 4.05 million tons, and the corresponding demand for PTA will be 3.46 million tons. Therefore, PTA will continue to exceed demand in February. In the later stage, there are plans to restart polyester production reduction and maintenance equipment in the early stage. Tongheng, Kaishi, Tiansheng, Shenghong, Hengyi and other equipment plan to restart, but there are also planned maintenance of Huaxi equipment, which will restrict the increase in polyester output. Overall, the domestic polyester output in March may rise compared with February.

3. Summary and suggestions

Taking comprehensive considerations into consideration, PTA has given a strong driver to the cost increase this time, and the PTA processing fee has been narrowed to a low level, and multiple factors have resonated. At present, the prices of crude oil and PX are firm, the downstream polyester inventory pressure is not great, the price is following the upward trend, and the profit of polyester after the holiday has improved, and the cost and demand continue to support the current price of PTA period. However, considering that the PTA load is still relatively high, and the recent large volume of new production capacity, it restricts the upward space in supply. Comprehensive considerations, the cost-side support is still there, the macro is good for the bulk commodity market, and it provides a good external environment for the PTA market. The downstream polyester demand has improved. The short-term PTA market is expected to be strong, but considering the high social inventory of PTA and a large amount of new production capacity Launch, the supply may restrict the upside space in the future.