Both Cost and Demand Weaken, PTA Prices Slightly Decline

May 17th, news:

Commodity market analysis system, since May, the overall PTA market in China has shown a weak operating pattern. As of May 17th, the average spot price of PTA in the East China region was 6,573 CNY/ton, a decrease of 4.29% from the beginning of the month. At the start of the month, due to PX cost support and large-scale PTA plant maintenance, prices briefly rose to around 6,700 CNY/ton. However, as downstream polyester and terminal textile demand remained weak, coupled with a reduction in crude oil premiums due to easing geopolitical tensions, prices have fluctuated and declined.

Supply has significantly contracted, with April to June being the peak period for annual PTA maintenance in China. The scale of maintenance in May reached a new high in recent years. Planned maintenance capacity is 18.1 million tons, and an additional 5 million tons of facilities underwent unplanned maintenance, with only 1.2 million tons restarted. By mid-May, the industry's operating rate fell to around 63%, a low point in recent years, indicating a significant tightening of supply. At the same time, processing fees have continued to recover, narrowing factory losses, and the willingness to reduce production and undergo maintenance passively is strong, providing fundamental support for prices.

However, high volatility in crude oil and PX prices on the cost side provides limited support. Crude oil prices have been fluctuating and adjusting; as of May 14, the settlement price for the June contract of U.S. WTI crude oil futures stood at $101.17 per barrel, while the settlement price for the July contract of Brent crude oil futures was $105.72 per barrel. In Asia, PX is undergoing synchronized maintenance, resulting in tight supply and a solid cost floor. Yet, downward transmission of these costs lacks sufficient momentum, only limiting the downside potential of PTA prices but making it difficult to drive a substantial price increase.

Demand remains persistently weak, with the downstream polyester industry operating at an only 81% capacity utilization rate, a significant year-on-year decline. With insufficient orders in the end-use textile sector and high inventories of finished products, polyester companies are proactively reducing their production levels, and rigid demand for procurement remains weak. Although autumn/winter orders and export orders have gradually started to pick up since late May, it will be difficult for conditions to improve significantly in the short term.

Analysts believe that in the short term, the benefits of PTA plant maintenance and inventory reduction will continue to be realized, and the contraction in supply will support prices. However, it will be difficult for demand to quickly recover during the off-season, which will weigh on prices. Additionally, from a technical perspective, the 10-day moving average has crossed below the 20-day moving average, and the difference between them continues to expand negatively. The further divergence between the 10-day and 20-day moving averages indicates that PTA prices are entering a downward trend.

Additionally, considering the 5-level positioning: The current price is at a one-year high and within the upper-middle range over the past 90 days, so we should be vigilant about the risk of a short-term pullback.