Weaker Demand Is Expected, PTA Prices Are At Risk of Falling

The domestic PTA market rebounded slightly. As of April 6, the average domestic PTA market price in East China was 6,230 CNY/ton, up 2.85% from the previous trading day and up 39.83% year-on-year. The main force of PTA futures 2205 closed at 6168, up 140, or 2.32%.

A 700,000-ton PTA unit in East China is scheduled to be overhauled on the evening of April 6, and a 2.2 million-ton PTA unit in Northeast China is scheduled to be overhauled on April 15 (the original plan was to be overhauled on April 10). The current industry operating rate of PTA is around 74%, and the circulating spot is relatively small.

On April 5, the international crude oil futures market closed down. The settlement price of the main U.S. WTI crude oil futures contract was reported at US$101.96 per barrel, a decrease of US$1.32 or 1.3%; the settlement price of the main contract of Brent crude oil futures was reported at US$106.64 per barrel, a decrease of US$0.89 or 0.8%. On the macro level, a higher dollar affected the valuation of oil prices due to the expectation of the Fed raising interest rates. On the demand side, oil prices were under pressure as market participants expressed concerns that the coronavirus outbreak will slow demand. But at the same time, the supply side was limited by Western sanctions against Russia, which hurt output and supply concerns limited the decline in oil prices.

Due to the pressure of inventory and cash flow in downstream polyester, some factories started to reduce the burden and reduce production, and the industry operating rate fell below 88%. The demand for terminal weaving was weak due to the disturbance of the epidemic, and the orders in the textile peak season were lower than expected, resulting in a not optimistic polyester demand, inventory situation, and certain variables in the production of new polyester production capacity.

The analysis believes that the current international oil price is adjusted at a high level, but the cost of PTA has not been significantly loosened. In addition, the mainstream PTA suppliers have reduced supply in April contracts, and the spot is still strong. However, the unfavorable factors on the demand and consumption side continued to slump upwards, resulting in a loss of polyester profits and a decrease in the start-up load. The joint production reduction of polyester factories will be implemented in early April, and the polyester start-up is expected to decline. The rigid demand for PTA and the demand for stockpiling will weaken. Therefore, it is expected that there is a risk of falling PTA prices.