Both Cost and Demand Weaken, PTA Prices Fluctuate and Decline in May

May 29th, News

According to the commodity market analysis system, by the end of May, the spot price of PTA in East China was 6,258 CNY/ton, a decrease of 8.87% from the beginning of the month. Increased maintenance and low operating rates in domestic supply provided limited support. The volatile crude oil prices dominated the market, and the lack of orders during the textile off-season weighed on prices.

In May, the international crude oil market generally showed a downward trend. The primary factor behind this was the rapid shift from the previous geopolitical conflict premium to expectations of easing tensions through negotiations, coupled with negative fundamental factors. Under the combined influence of four key factors—the signals of resumed U.S.-Iran talks, the partial resumption of shipping traffic through the Strait of Hormuz, the IEA’s downward revision of supply-and-demand forecasts, and the sharp increase in API inventories—risk premiums previously embedded in oil prices have largely dissipated, leading to a downward trend in crude oil prices. Moreover, weak global demand and concerns that escalating geopolitical conflicts could weigh on the economy and oil consumption have further driven down crude oil prices significantly. Affected by the decline in crude oil prices, gasoline and diesel prices at China’s independent refineries have remained at low levels. As of May 28, the settlement price for the July contract of U.S. WTI crude oil futures stood at $88.90 per barrel, while the settlement price for Brent crude oil futures contracts reached $93.71 per barrel.

On the supply side, some facilities of major PTA plants in China have already undergone maintenance in April and May. Specifically, the 2.5 million ton PTA unit #1 of Dushan Energy was shut down around May 16, the 2.5 million ton PTA unit #1 of Honggang Petrochemical had a brief shutdown on May 23, and the 2.5 million ton PTA unit #1 of Hengli Huizhou was temporarily shut down on May 29 due to an unexpected issue. The current operating rate of the PTA industry is less than 60%.

Demand for polyester has been affected by a significant rise in raw material prices, leading to a lower operating rate compared to previous years, with the polyester operating rate around 80% by the end of May. However, overall terminal orders remain weak, and at high prices, substitution effects have become evident, with terminals mainly focusing on digesting their existing raw material inventories, resulting in limited procurement. The weaving industry is trying to minimize production to control the rate of inventory increase.

Analysts believe that the crude oil market is primarily focused on the geopolitical tension negotiations in the Middle East. If the conflict in the Middle East persists for a long time, it will not only lead to a continuous rise in oil prices but also exacerbate global inflationary pressures, thereby dragging down global economic growth. In the short term, the crude oil market is expected to experience wide fluctuations. On the demand side, the recovery of the polyester supply chain still requires time, and the downstream sector is currently in the off-season. In the short term, prices are expected to remain under pressure, and future developments will still need to monitor changes in costs and demand.

Additionally, according to Xianhuotong, the 10-day moving average has crossed below the 20-day moving average, and the difference between the two averages continues to widen in a negative direction. The 10-day and 20-day moving averages are diverging further, indicating that the PTA market is entering a downward channel.

Combining the 5-tier position, the current price is in a high range for both the past year and 90 days in China, so one needs to be cautious of the short-term downward risk.