July 24th News
The renewed escalation of geopolitical conflicts in the Middle East has spurred a rebound in international crude oil prices, while upstream PX prices have also risen in tandem, providing a floor for costs. Coupled with the ongoing inventory reduction driven by concentrated maintenance shutdowns in the PTA industry, PTA prices have been fluctuating and rising this week. As of July 24, the PTA market price in the East China region stood at 6,170 CNY per ton, up 1.49% from the beginning of the week. Meanwhile, downstream weaving remains in the traditional off-season, and downstream polyester factories are only making purchases to meet immediate demand, thus limiting the scope for further price increases.
Looking ahead, on July 23, the crude oil market saw a sharp rise as the attack on a Saudi oil tanker in the Red Sea coincided with the escalating U.S.-Iran standoff. This triggered a concentrated surge in risks along two key Middle Eastern crude oil shipping routes, sending international crude oil prices into a new round of significant gains. Brent crude once again firmly broke through the $100 mark for the first time in two months. The September contract for U.S. WTI crude oil futures closed at $92.19 per barrel, up $5.36, or 6.2%. The September contract for Brent crude oil futures closed at $100.69 per barrel, up $6.62, or 7.0%.
PX follows the rise in crude oil, locking in the bottom of PTA costs. Currently, PX units are operating at low levels, the market is continuously destocking, and supplies are tight. Additionally, the delay in the restart of some units provides favorable support to the cost side of PTA.
In terms of domestic supply, the concentrated maintenance of PTA in July reduced the industry's operating rate to as low as around 53%, with an expected destocking of 900,000 tons for the entire month. Spot inventory reached a multi-year low, providing strong support for prices. PTA facilities with a combined capacity of several million tons, including those of Honggang Petrochemical, Fuhai Chuang, and Zhongtai Chemical, will be restarted between late July and early August. The market has already factored in the expectation of increased supply, leading to a significant slowdown in destocking, and processing fees will gradually decrease from their previous high levels.
From the perspective of downstream demand, as the weather gets hotter, the textile industry enters the traditional low season. The terminal orders in the Jiangsu and Zhejiang weaving sector are insufficient during the low season, and the market is pessimistic about the strength of the terminal peak season recovery, leading to insufficient bullish drivers. It is difficult for the weaving machine operating rates to increase, and coupled with the uncertainty of geopolitical issues, textile enterprises find it hard to smoothly pass on cost pressures to the terminal. Textile enterprises maintain a state of low inventory and high turnover, which is likely to result in a limited increase in polyester production load in August.
Therefore, in summary, analysts believe that in the short term, due to geopolitical tensions, crude oil prices will continue to rise. With more PX maintenance and low PTA supply, downstream demand is weak, and there are concerns about future PTA supply returning. It is expected that in the short term, the market will mainly follow cost fluctuations. Future developments still need to be monitored, including geopolitical dynamics and the restart of PTA facilities in China.
