On the 21st, the spot price of PTA rose by 114 yuan/ton to 6,008 yuan/ton, and futures rose by more than 3% in a single day.
PTA futures exceeded 6,000 yuan/ton again! The reason for PTA’s single-day surge this time is mainly due to the strong demand and good commodity atmosphere, supported by the rise in international crude oil, and the PTA futures spot has been supported.
Looking back at the recent trend of PTA, we will find that PTA has been on the strong side for a long time. Even if it drops below 6,000 yuan/ton, it will soon rise again. The main reason for the ups and downs of PTA prices is the differences between upstream and downstream. Currently, PTA is in a dilemma. On the one hand, the cost side continues to be strong, and on the other hand, it is worried that the terminal cannot keep up, which makes PTA very painful to be caught in the middle.
01Strong support from the cost side
On the cost side, international oil prices have risen, coupled with the current good atmosphere for chemical commodities, PTA’s current performance is still supported and its performance during the day is relatively strong. In terms of crude oil, Kuwait has cut crude oil exports by nearly one-fifth to meet the needs of its new large-scale refinery. According to Kpler data, Kuwait’s crude oil shipments from January to July dropped by about 10% from the same period in 2022 to 1.61 million barrels per day as the AlZour refinery expanded. The imminent export of crude oil will boost oil prices, and crude oil will continue to be a strong support for PTA in the future.
02Lack of support on the demand side
On the demand side, the traditional off-season has come to an end, and the gray fabric weaving market has also heated up slightly in late August. Cloth merchants are actively stocking up in advance, new orders have begun to be placed, and gray fabric inventories have shown a slight downward trend. However, the inventory of gray fabrics in terminal weaving factories has always been relatively high, and the current inventory days are still around 40-50 days. Moreover, the situation in the traditional peak season is not clear. Considering price fluctuations and financial issues, most manufacturers choose to stock a small amount of goods that are just needed and will not spend money on raw materials. Therefore, the stocking of raw materials has always been at a low position. When PTA factories are worried that terminals will not be able to keep up, even if there is support from the cost side, the increase of PTA will be limited to a certain extent.
According to data monitoring from Silkdu.com, the current operating rate of water-jet and air-jet looms in Shengze is 69.1%. Looking at the load operation of weaving operations in the first half of the year, we can see that since the Spring Festival, the weaving load has increased rapidly, once climbing to between 60% and 70%. Then after experiencing the “Gold, Three, and Silver” periods, terminal demand gradually declined, and then weaving Construction starts declined slightly until after May, when there was another correction. However, the actual correction in construction starts was limited, hovering around 60%. It is still difficult for the weaving factory’s load to exceed 80%.
Currently, PTA’s operating load is 80.87%, an increase of 1.36% from the end of July. Regarding the start of polyester load construction in August or even September, most market views are relatively optimistic, believing that the probability of a short-term load reduction is still not too great. However, it should be noted that the current PTA processing fee is still low, and the possibility of centralized maintenance cannot be ruled out, and the market will continue to rebound by then. PTA social inventory is also rising. Currently, PTA social inventory is 2.5964 million tons, an increase of 104,500 tons from the end of July. As social inventories increase, PTA increases will also be limited under the pressure of supply and demand.
In the global environment, concerns are growing that the Federal Reserve’s actions to raise interest rates to combat inflation have not yet been completed. Rising borrowing costs can hamper economic growth, reducing overall demand for oil. With personal consumption expenditures inflation averaging 3.7% in the second quarter, the Fed may be forced to tighten its policy benchmark to at least 6%. At the same time, the inversion in yields shows that the risk of a U.S. economic recession still exists in the short term.
Surrounded by negative news, it is expected that the PTA market price may adjust within a narrow range in the short term. The actual trend requires attention to the performance of crude oil and the expectation of unplanned reduction and shutdown of equipment. The cost side is strong and the downstream cannot keep up, which will force PTA factories to reduce production. Especially if there are no supporting PTA factories in the upstream and downstream, this possibility is more likely.
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