Firm Costs and Weak Demand Lead to High-Level Fluctuations in the Chinese PTA Market

April 3 news

Since mid-March, the PTA market in China has shown a high-level fluctuation trend. According to the commodity market analysis system, as of April 3, the spot price of PTA in the East China region was 6,771 CNY/ton, an increase of 2.59% compared to March 15.

From a cost perspective, PTA prices have always been driven by the strength of upstream raw materials, which is the core factor supporting its high-level operation. Recently, the international crude oil market has been affected by the tense geopolitical situation in the Middle East, causing oil prices to remain at high levels with volatility, and continuously raising the bottom of the cost end. On April 2, the settlement price of the May contract for U.S. WTI crude oil futures was $111.54 per barrel, and the settlement price of the June contract for Brent crude oil futures was $109.03 per barrel. At the same time, the Asian PX market is entering a concentrated maintenance season, with supply remaining tight, and PX prices staying firm, further pushing up the production and processing costs of PTA.

Under high cost pressure, the processing fees in the PTA industry have been continuously compressed, narrowing the profit margins for some production enterprises. This has forced major factories to proactively reduce loads and cut production, forming a dual support of cost and supply, effectively curbing the space for a significant drop in PTA prices. Leading companies have successively reduced the operating load of their facilities, with major manufacturers such as Yisheng New Materials implementing a 30% reduction in load starting from April. The overall operating rate of the industry is around 78%, with the market circulation of goods tightening, and the benefits on the supply side continue to be released.

The downstream polyester industry in China is experiencing weak terminal orders, with no significant recovery in demand for textile and garment exports and domestic sales. Polyester factories and weaving enterprises are facing high finished goods inventory and considerable pressure on capital turnover. As a result, their willingness to purchase high-priced PTA is low, and they mainly focus on small, essential orders. Some polyester factories have even been forced to reduce production, gradually lowering their operating rates. This poor demand transmission for PTA has made it difficult for PTA prices to sustain a continuous upward trend.

Analysts believe that the cost factors of crude oil and PX remain the dominant influences. If geopolitical tensions continue and the tight supply situation for PX does not change, PTA prices will continue to receive strong support. However, the delayed recovery in terminal textile demand will limit the upside potential for prices. It is expected that the PTA market will maintain a high and wide-ranging volatile trend in the short term.

In addition, the future trend of PTA prices can be analyzed through two dimensions of the commodity market analysis system:

When the 10-day moving average is above the 20-day moving average, the probability of a price increase is higher; conversely, the probability is lower. Currently, the 10-day and 20-day moving averages for PTA prices in China are closely aligned, so it's important to pay close attention to the timing.

II. Current Position: Currently, PTA prices over the past 10 and 20 days have been at the median and mid-to-low levels, indicating that the current position still holds a certain advantage.

Overall, PTA is currently in a fluctuating trend, and its position is still acceptable. Attention should be paid to the intersection turning points of the moving averages to find opportunities.