An important driver of the strong performance of polyester chains last week was the cost end. As oil prices fell, polyester chains, which had previously led the gains, were among the largest decliners. On the 16th, ethylene glycol led the way down by more than 4% to 3,951 yuan. PTA and staple fiber fell 2.48% and 2.49% respectively.
After falling for two days, international oil prices gave up last week’s cumulative gains and once plummeted by more than $5 during the session. Iran’s foreign minister claimed that Iran will respond to the EU’s nuclear text before midnight on Monday and that if the United States agrees to the three remaining issues, a nuclear deal can be reached. The market fell sharply after hearing the news and will receive a reply from the EU in the next two days. However, if no agreement is reached in the end, there may be significant turbulence at any time as the information comes out.
The supply and demand side of ethylene glycol is obviously weaker than that of PTA and staple fiber, and the market is under obvious pressure. Industry maintenance was the most intensive in August, with integrated and coal chemical equipment undergoing certain maintenance. In addition, the coal chemical industry was affected by profit issues, and the restart of some parking equipment was often delayed. The recovery of output in September was still relatively slow; however, with the recent increase in the Zhejiang Petrochemical, Zhejiang Petrochemical, Satellite, etc. also have restart plans in the later stage, and the overall start-up of integrated equipment in the later stage will be significantly improved. At the same time, in the short term, centralized replenishment of urgent demand is gradually becoming thinner. Poor terminal orders are coupled with power cuts. It is currently difficult to achieve higher loads, and there is currently no positive driver for demand. Under the influence of the restoration of ethylene glycol production, the market expects that social inventories will return to the accumulation cycle in September.
TA processing fees remain low. Due to increasing losses, 27.35 million ton devices, including Fuhaichuang’s 4.5 million ton device and Yisheng’s three 10-million-ton devices, were shut down for maintenance or load reduction in July. Domestic PTA operating load continues to be less than 70%. Most of the devices that were overhauled in July will resume production or operate at full capacity from the end of July to early August. Hengli Petrochemical 3# and Fuhai Chuang are expected to restart next week.
At present, domestic polyester inventories are high, and companies are under great pressure to destock. Since terminal demand has not been followed up, polyester companies have been forced to cut prices to remove inventory. This has led to continued compression of polyester company profits. In addition to bottle flakes and industrial yarns, polyester filaments and staple fibers are basically in a break-even state. Under such circumstances, domestic polyester companies are less motivated to produce, and Jiangsu and Zhejiang have issued orderly power consumption policies for some textile bases to cope with peak power shortages. The polyester end still has insufficient support for the upstream. However, as the weather turns cooler in late August, if consumption can pick up, the impact on the industrial chain may change from a drag to a neutral one.
The short-term supply increase is limited, the superimposed spot processing fee is low, and there is some support for short fiber prices. However, the market expects that fundamentals will still show a trend of increasing supply and demand and decreasing demand. After mid-July, the downstream yarn procurement capacity was weak, and its own finished product inventory continued to accumulate. At present, the output of short fiber has been at a high level in the past three years, and is showing a reverse trend with 2021. From the later production plan, the supply increase is obviously expected.