Since October, the domestic PTA market has continued its downward trend, and the overall negotiation atmosphere has been poor. Spot prices in East China fell from 6,350 yuan/ton on October 8 to 5,880 yuan/ton on October 25, a decrease of 7.40%.
On the other hand, although the nominal quotation of polyester yarn is strong, the transaction price has reached a record low. The recent transaction discounts of large and small factories are mixed. The discounts quoted are 400, 500, 600, 700… each company is competing to ship goods. Judging from the CCF polyester price index, the average spot price index of conventional semi-gloss POY150/48 has refreshed the low price at the end of April and mid-July, successfully exceeding 7,500 yuan/ton and heading towards 7,000 yuan/ton.
Recently, the main PTA factory equipment has been undergoing maintenance and load reduction operations. In addition, new equipment is expected to be put into operation. Polyester factories also intend to reduce production in response. Where should the polyester market go in the future?
There are clear signs that PTA construction has passed its low point
There is great downward pressure on varieties in the polyester industry chain
This round of large-scale production cycle of PTA and PX started in 2019/2020 and continues to this day. After the National Day holiday, various varieties of the polyester industry chain performed poorly. The boosting effect brought by rising crude oil prices has now been completely withdrawn and returned to pre-holiday levels.
The reason for this round of decline in polyester raw materials is, on the one hand, the impact on the cost side. Investors’ concerns about high inflation, economic recession, and declining energy demand have led to lower oil prices. The weakening cost side has driven the polyester raw material market to fall simultaneously.
On the other hand, due to the influence of its own supply and demand, since October, the load reduction devices of PTA factories have been restored one after another, and the operating rate has returned to more than 78%. The increase in supply has lost support for PTA prices. At the same time, the downstream demand performance is average, and only necessary replenishment is maintained. Mainly, the fundamentals of supply and demand have not been significantly positive, and PTA prices are mainly weak.
As far as the recent market is concerned, as the 2.2 million tons unit of Hengli Petrochemical No. 2 was carried out for maintenance on the 25th, and the 6.6 million tons PTA unit of Yisheng New Materials was reduced to 80% of the operating load, the supply volume shrank again, and the current downstream gathering The start-up of ester and weaving continues to be stable, and the futures-to-cash basis continues to be at a high level. In October, the transaction basis of the main port in East China was 580-600 yuan/ton, in mid-November, the transaction basis was 450 yuan/ton, and at the end of November, the transaction basis was 250 yuan. /Ton.
However, the fourth quarter is the window period for the PTA industry to put into production. It is reported that PTA will put into operation a new 7.5 million tons plant in November. As PTA overcapacity has become an industry consensus, supply pressure may continue to increase. In addition, new equipment for raw material PX has been put into operation with great efforts. For example, Shenghong Refining and Chemical’s 2 million-ton unit produced qualified products on October 26, Weilian Chemical’s second-phase 1-million-ton unit is expected to be put into operation in mid-to-late November, and Guangdong Petrochemical’s 2.6-million-ton unit is expected to be put into operation. It is expected to be put into production in December.
At present, there are very clear signs that the low point of PTA operation has passed. If the demand side does not improve substantially, then the increase in operation rate will add pressure to production, and it is very likely that PTA will accumulate inventory in the future. Therefore, in the absence of favorable promotion, the downward pressure on polyester industry chain varieties is greater.
Dual pressures of high inventory and weak cash flow
Polyester companies face rapid inventory depreciation
Since entering the peak season, polyester load has been hovering around 84%, and peak season demand has not recovered. Although the polyester load has rebounded from August, and loom operations in Jiangsu and Zhejiang have rebounded to 74%, a significant rebound from August, terminal orders are still relatively weak, and the resilience of peak season demand has not yet been reflected. Polyester companies are still facing major difficulties. On the one hand, polyester companies have maintained high inventories, especially filament companies, which still maintain about 30 days of inventory in various filament categories. On the other hand, although the current cash flow of polyester companies has been restored due to the recent decline in raw material prices, the decline in raw materials has driven the price of polyester finished products to fall. For polyester companies with high inventories, the inventory depreciation has made polyester companies still Facing greater cash flow pressure.
Therefore, in the peak season, domestic terminal demand has not yet picked up. The export sales of autumn and winter clothing fabrics and overseas Christmas and New Year’s Day orders have not yet seen significant benefits. The inventory of gray fabrics in the current period is slow, and polyester companies are facing high inventory and weak cash flow pressures. Under dual pressure, it is difficult for polyester enterprises to significantly improve their load. The current polyester load is at a low level similar to that in 2018. However, in 2018, it began to fall rapidly from September, while this year it has been running at a low level for a long time.
Therefore, given the poor performance of terminal demand, the early Lunar New Year, and insufficient support after November, the polyester industry chain lacks substantial positive support. Although the fundamentals are still good now, the market has strong expectations for a weakening supply and demand pattern in the later period.