PTA Will Also Shake The Bottom Market Later.

In the first half of the year, the traditional peak season of PTA is coming to an end. The centralized maintenance of PTA devices is gradually ending. In addition, the profits of PTA production enterprises are high, and the enthusiasm of enterprises to start up is high. PTA itself is basically empty.

The most unfortunate thing is that the current European debt crisis is intensifying and international crude oil is in flux.

As the source of chemicals, the sharp fall in oil prices has undoubtedly become one of the biggest culprits of chemicals falling, including PTA.

For the future market, the author believes that due to the macro concerns still exist at home and abroad, the action on PTA can not be enough, or the market will be dominated by oscillations.

Crude oil has enhanced cost guidance for PTA

When the gross profit of PTA suppliers is high, the driving effect of PX rise on PTA price will be greatly reduced, because the driving force of cost is largely offset by the gross profit of PTA enterprises.

However, once the price of PX falls, it will lead to the loss of the center of gravity of PTA and move rapidly down. The collapse of PTA price in May explains this phenomenon very well.

In May, as the spot price of PX plummeted, the cost of PTA declined rapidly.

At the end of May, the spot production cost of PTA fell below 6000 yuan / tonne to 5860 yuan / ton, but then rebounded with the rise of oil price.

As of May 31st, Asia's PX was US $914 / tonne, which estimated that PTA spot production cost was 6115 yuan / ton, compared with the 7300 spot price of PTA spot in Jiangsu and Zhejiang area, the gross profit of PTA spot production remained at a high level of 1185 yuan / ton line.

In May, despite the sharp fall in oil prices, the settlement price of PX contract remained at $1060 / ton as scheduled, rising by 40 US dollars / ton compared with April, indicating that petrochemical enterprises still maintained some strength. In this estimation, the production cost of PTA contract goods was roughly 6900 yuan / ton. In May, the settlement price of domestic PTA contract goods was 7800 yuan / ton, and the gross profit of PTA contract goods was roughly 900 yuan / ton, although it was substantially lower than April, but this is still a more satisfactory profit level for PTA production enterprises.

As of May 31st, the June PX contract quotations from New Zealand, Japan and ExxonMobil were 1000 US dollars / ton, US $1020 / ton and US $1030 / ton respectively, and PX supplier's intention to protect "thousand" is obvious.

In terms of PX1000 US dollars / ton, the production cost of PTA is roughly 6580 yuan / ton. On the whole, the production cost of PTA in June is decreasing.

From the known operating conditions of PX devices in Asia, due to the small profit margins, PX manufacturers are more inclined to reduce the start-up rate of equipment slightly, but the overall supply is not changing much.

This is because since July 2009, due to the large expansion of PX capacity in Asia, including China and the Middle East, the supply of PX in Asia, especially China, has gradually increased and competition has intensified.

At the beginning of 2010, the price difference between PX and MX went down all the way. Since March, the price difference between the two has been hovering at 130 US dollars / ton - 100 US dollars / ton; and the difference between PX and naphtha is hovering between 240 and 300 US dollars / ton. From the price difference, the profiteering era of PX petrochemical enterprises has come to an end, and PX production enterprises are beginning to enter a meager profit era, which means that the fluctuation of international crude oil prices will enhance the price trend of PX and increase the cost of PTA.

International demand for crude oil is expected to pick up gradually as the peak season for oil in Europe and the Middle East is approaching.

However, considering that the current European debt crisis has not yet been completely resolved, last week, international rating agencies lowered Spain's credit rating and other factors. We are cautiously optimistic about the short-term performance of international oil prices. We expect oil prices to be more than $70 or more, but there is little room for improvement.

PTA seasonal demand turns pale

June is the traditional consumption season of PTA in China. As the spring and summer clothing has been basically listed, PTA terminal textile and garment factories will generally reduce the purchase and use of PTA downstream polyester products.

In May, we noticed that despite the gradual decline of the whole polyester market driven by crude oil, the gross profit of polyester products from the PTA downstream still maintained high. However, at the end of the month, the pet factory was mainly motivated by positive shipping, which showed that it was not enough confidence in the future market.

In addition, from the PTA terminal demand textile and apparel performance, China's textile and clothing domestic demand recovery is obvious, but the future export demand seems to be difficult.

From 1 to April, China's textile and apparel exports totaled US $55 billion 300 million, an increase of 15.76% over the same period last year.

Among them, textile exports amounted to US $23 billion 108 million, an increase of 25.90% over the same period last year, and clothing exports amounted to US $32 billion 192 million, an increase of 9.44% over the same period last year. China's textile and garment exports showed an increasing trend.

However, what is worrying is that the European Union is still the largest exporter of textile and clothing in China. As the debt crisis in Europe is still unresolved, and the euro has depreciated by 14% relative to the RMB since May 31st this year, the recovery of China's textile and garment exports in the second half of this year is not a smooth sailing.

In addition, since the recent Foxconn incident and the Honda Auto Workers' strike in the South China Sea, the wages of Chinese industrial workers will continue to show an overall trend in the future. The textile and clothing of the PTA terminal in the future still need to face the pressure of increasing labor costs and continuing to digest the cost increase.

The supply pressure of PTA remained in June.

In May, the operating rate of domestic PTA plants increased significantly compared with April. At the end of the month, the domestic PTA plant operation rate rose to around 95%.

According to the known device maintenance information, in June, the PTA devices mainly involved Far East and BP companies in China, and there were not many domestic PTA devices.

In addition, in June, a 600 thousand tonne PTA plant of India oil company (IOC) is expected to go into operation, or will increase the supply pressure of PTA in Asia.

The gross profit of PTA production is still maintained at a more satisfactory level than that of the manufacturer. PTA production enterprises will still maintain a relatively high starting enthusiasm, and it is very difficult to reduce the operating rate of the plant.

Due to the relatively strong demand for PTA in China, the import of TA in China increased in April. China Customs data show that in April, China imported PTA and QTA59.72 million tons, an increase of 18.5% over the same period last year. Taiwan, Korea and Thailand imported PTA21.98 million tons, 174 thousand and 700 tons and 56 thousand and 600 tons respectively, but the import of QTA was 102 thousand and 700 tons, accounting for 83% of the total QTA imports.

Although China has imposed a deposit on the import PTA of Korea and Thailand, the import of PTA from Taiwan has made up for the decline of PTA imports in Korea and Thailand, resulting in a decline in TA imports, including QTA.

As the PTA suppliers in Asia still have relatively satisfactory profit margins, and the early commitment of mainland China to Taiwan, it is expected that the import of PTA will not change dramatically in June.

In addition to the above cost factors and supply and demand factors, monetary policy and the performance of domestic financial markets including A shares are also influencing the price of PTA.

Although the European Union adopted a rescue plan for Greece, and China said it did not reduce its European debt, it once strengthened market confidence. However, last week, Fitch downgraded Spain's sovereign rating, triggering further worries about the euro zone economy, and the European debt crisis has not yet been completely resolved.

From the perspective of domestic financial markets, China and the US will be allowed to enter the domestic stock index futures market by the news of the Sino US economic strategy talks. This has led to speculation and concern about the short selling of A shares by foreign capital in the market.

In addition, when the domestic real estate regulation gradually eased, it was reported that the Shanghai property tax scheme has been reported to the Central Committee, and the State Council has agreed to gradually promote the property tax reform, which will once again blow the bull market confidence in the financial market.

In addition, although the central bank said it would release 780 billion of its domestic capital in June, then the massive refinancing of IPO and other listed banks in the past would greatly reduce domestic liquidity release to the financial market.