During the year, PTA futures prices fluctuated and rose. After the Spring Festival, the market opened after the Spring Festival. Under the cost support of the surge in crude oil prices, there was a wave of rising prices. The main contract hit a stage high of 5,012 yuan/ton on February 26. After a slight correction, It continued to fluctuate upward, and broke through the previous high on July 6, with the highest price of the main contract touching 5,442 yuan/ton.
1. Strong cost-side support
In the first half of 2021, international oil prices showed an overall upward trend, and international oil prices began to rise in early July There has been a correction. As of the close of July 16, the average Brent price was US$71.81/barrel. This was mainly due to the agreement between Saudi Arabia and the United Arab Emirates to increase the production base of the United Arab Emirates. OPEC may begin to increase production next month. At the same time, the daily output of U.S. crude oil increased, and the oil market sentiment was suppressed. Looking at the second half of the year, it is expected that crude oil prices may remain high amid expectations of a strong U.S. economic recovery. Many institutions predict that Brent oil prices may reach US$80 per barrel in the second half of the year.
The contradiction between PX supply and demand improved significantly in the first quarter, and profit recovery was obvious. In the second quarter, PX was in a gap period of relatively intensive maintenance and new production capacity. As of July 16, the average FOB price in South Korea in the first half of the year It is about US$904/ton, much higher than the same period last year. In the near future, due to the decline in crude oil prices, PX prices have corrected somewhat, but still remain at a high level. In the short term, we will pay attention to the liquidity of supply in August. I heard that the market is still tight. The absolute price trend needs to be watched at the cost-end oil price.
Figure 1: Crude oil-PX-PTA price chart
Data source: Wind
Overall, PTA’s cost support has increased significantly since this year. Although the cost-side crude oil and upstream PX prices have corrected recently, they still remain at high levels, and PTA’s cost support is still there. Looking at the second half of the year, oil prices are also an important factor affecting PTA prices and require continued attention.
2. Short-term supply has shrunk
From a supply perspective, Supply in June decreased compared with May. PTA output in June was 4.4256 million tons, a month-on-month decrease of 21,600 tons, or 0.49%. The operating rate of domestic PTA has declined recently. As of July 16, the overall operating load of PTA equipment was 76.78% (the production capacity base was adjusted to 66.29 million tons/year on July 9). According to the calculation of the PTA routine maintenance plan in July , domestic PTA supply and demand is expected to continue to show a destocking state that month.
Figure 2: PTA monthly output (10,000 tons)
Data source: Longzhong Information
In terms of inventory, according to statistics, as of July 15, 2021, PTA factory inventory is about 3.9 days, mainly because some PTA factories have entered a shutdown and load reduction state, resulting in PTA Factory inventories have dropped significantly; PTA social inventories are approximately 3.717 million tons, a decrease of 51,800 tons from last week and a month-on-month decrease of 1.37%. Some PTA devices are being overhauled and restarted in parallel. Among them, Ningbo Taihua’s 1.2 million-ton unit is undergoing maintenance, the load of Fuhaichuang’s 4.5-million-ton unit is gradually declining, and the Xinfengming 2# 2.5-million-ton unit has resumed and restarted. The downstream polyester load maintains high operation and provides good support for PTA. As a result, inventories have moved downward.
Figure 3: PTA weekly social inventory
Data source: Longzhong Information
3. Demand is mainly rigid demand
From the demand side, first Polyester has always maintained a relatively high load operation in the quarter. During the Spring Festival, due to the impact of the policy of celebrating the New Year on the spot, the seasonal maintenance intensity was significantly weaker than the same period in previous years. In the second quarter, the polyester segment was forced to undergo periodic production reduction maintenance due to cash flow and inventory pressures. , driving the operating load to decline, but the low point is also around 90%. The overall polyester production start-up level in the first half of the year is still higher than the same period in previous years. Currently, the terminal is in the traditional off-season for consumption, with weak demand. The consumption of polyester yarn has weakened, and the polyester load has been slightly reduced, but it still maintains a high level. As of July 14, domestic polyester production started at 89.47%. Overall, PTA Demand remains supportive.
Figure 4: PTA downstream operating rate (%)
Data source: Wind
On the one hand, the pressure on polyester factories is reflected in the rising inventory. Although the increase in raw material prices is expected to drive the growth of some speculative demand, due to the weakness of current orders, weaving factories have a more wait-and-see attitude. On the other hand, the rise in PTA and ethylene glycol at the raw material end has squeezed the profits of polyester, and the cash flow of the polyester segment has shrunk to varying degrees. In particular, the cash flow performance of bottle flakes, slices, and staple fiber varieties has been poor, and there may be subsequent production cuts and maintenance. This may lead to a certain decline in polyester load. However, the weaving process continues to consume inventory. It is understood that the current stocking days of comprehensive raw materials for terminal weaving are about 1-2 weeks, which is at a relatively low level. If there are new orders in late July in the future, it is expected to usher in a centralized replenishment period. Of course, we need to be wary of the failure of demand in the peak season in the future. It is difficult for terminal orders to significantly improve, and conflicts in the industrial chain will gradually be transmitted upward as time goes by.
Figure 5: Polyester filament inventory days (days)
Data source: Wind
In terms of terminals, as of July 14, the comprehensive operating rate of chemical fiber weaving in Jiangsu and Zhejiang regions was 76.26%. In terms of domestic demand, current consumption has basically returned to pre-epidemic levels. In the future, under the guidance of policies to expand domestic demand, there is still room for improvement in the consumption field, and the overall growth rate is close to the GDP growth rate. From the perspective of external demand, vaccines are being continuously administered around the world. Eventually, the COVID-19 epidemic will gradually subside. There is a high probability that global clothing demand will continue to recover, and textile and clothing exports will also rebound simultaneously. However, in the second half of the year, mutated viruses will have an impact on the effectiveness of vaccines. Challenges in the future and the relatively slow vaccination still exist. In addition, high sea freight has also inhibited exports. The road to export recovery may be bumpy.
4. Summary and suggestions
In the short term, the cost side Crude oil is currently showing a correction trend in general, and the uncertainty of the later trend is increasing. We are currently waiting for the output policies of important oil-producing organizations to form clear guidance for oil prices. From the perspective of supply and demand structure, although the supply has increased in a narrow range, the demand performance is relatively strong. The high load of polyester is a strong support for the demand side, and the pattern of supply and demand destocking may continue in the short term. Therefore, under the premise that the supply and demand side is relatively relaxed, but there is no clear direction for crude oil, we expect that the PTA price will mainly adjust to a slightly lower high in the near future.
In the second half of the year, it is expected that crude oil and PX will still provide strong cost support for PTA. At the same time, PTA will suspend storage pressure due to the uncertainty of the commissioning time of new production capacity, which will bring about processing With the short-term rebound in fees, the destocking pattern may still be maintained in July. The overall pattern of destocking may be maintained in the third quarter. The pressure of oversupply will still be great in the second half of the year. It is expected that the overall PTA trend in the second half of the year will be high and then low. Pay attention to the low profit situation. supply and demand rebalancing process. </p
