Futures heat up, PTA welcomes “warm winter sun”

Recently, as the effect of the Double 11 shopping festival has faded, domestic sales have weakened, and Christmas orders are coming to an end, causing the export market to also decline. The comprehensive operating rate of looms in Jiangsu and Zhejiang fell to around 81%, down 3 percentage points from last week. Terminal demand gradually weakened, and as PTA equipment restarted during the week, construction started steadily stood at 70.35%. Downstream demand is gradually weakening.
From the supply side, Hailun Petrochemical’s 1.2 million tons/year unit restarted at the beginning of this week, and PTA operation rose to more than 70%. The increase in the supply side and the slight decline in downstream polyester production starts. From the perspective of the domestic trade market, due to the obvious wait-and-see mood of polyester, the overall transaction volume during the week was still dominated by hedging dealers’ pricing and suppliers’ repurchases of spot goods. Without certain polyester buying support, spot prices were weak in chasing prices. It can be seen that PTA is currently in a weak equilibrium stage, and the futures market has continued to rise during the week, slowly recovering the lost ground on Double 11. However, the spot market cannot yet support the futures’ strength in consecutive days. Why are PTA’s recent futures so strong under the current adverse market conditions?


It has to be said that the commodity futures market has been strongly bullish recently. Although it experienced the capital massacre of Double 11 in the early stage, the futures market quickly forgot about it and the upward trend remained the same. Mainly due to the logic of RMB depreciation and rising inflation, the futures and spot markets are obviously bullish; especially under the supply-side reform, the improvement of supply and demand relations has led to a sharp increase in futures varieties. In addition, the recent depreciation of the RMB, gradually approaching the 7 mark, has also boosted the PTA market to a certain extent, which is conducive to textile exports and supports market mentality.
Next week, BP plans to shut down its 1.25 million tons/year unit for maintenance at the end of the month. No changes to other units have been heard yet. Affected by the above-mentioned units, it is expected that PTA start-up will decline next week, or to 67.8%. The start-up of downstream polyester factories is relatively stable, and polyester factories are expected to stabilize at around 80%. The recent rebound in the commodity market has not yet ended, and the overall atmosphere of PTA futures is relatively warm. However, high-level transactions in the spot market have been weak, and downstream and terminal demand has gradually weakened. Although it is not yet negative for the current PTA market, it will weaken the sustainability of PTA’s rise. In addition, facing the OPEC meeting next week, even if an agreement on production reduction is reached, the extent may be lower than market expectations. It is expected that the upside potential of PTA may be limited under cautious and bearish expectations on the cost side.