PTA: Cost Support Price Rises Passively.

Supply and demand is the impact

The most fundamental factor in the trend is to find the reasons for the rise of PTA first from the supply and demand side.

First of all, the overall supply and demand pattern of PTA is still becoming more relaxed.

As of May 31st, the domestic PTA load was 73.49%, a slight increase compared with the end of April.

In addition, there are not many enterprises that plan to overhaul in the near future. The capacity of Yanda grand 2 million 200 thousand ton which was planned to be overhauled at the end of May has not been overhauled.

Therefore, in the short term, there will be no major changes in the PTA start-up load and the overall supply side has not been significantly tightened.

Secondly, as of June 3rd, the domestic PTA production enterprises' inventory was 3 days, although it was 1 days lower than that in May 20th, but the margin was limited, and the inventory level was twice as high as the overall level in April.

Finally, the recent downstream

The start-up load is relatively high, and the overall demand is hard to improve again.

In addition, during the G20 summit, environmental protection considerations, some polyester enterprises may face administrative mandatory shutdown, which involves 1/4 of total polyester production capacity.

Overall, the impact of PTA imports and exports is not large, so we only need to consider.

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At present, domestic start-up load is at a high level, and there is no large area overhaul in the short term.

Although the inventory is declining, the scope is limited, while demand is good, but there are significant risks.

This supply and demand pattern can not only support PTA's rise or even empty space, but what supports PTA's price rise?

Since supply and demand can not support PTA's rise, let's look at the cost side.

First of all, the import price of PX is calculated using the tariff of PX (FOB) of the Republic of Korea (PX) x 1.17 (value added tax * 1.08), and the PX import price is calculated. Secondly, the variable cost of PTA is calculated by the ratio of PX import price * PTA to PTA, and finally, the price of the PTA spot price and the variable cost of PTA are used to observe the current operation of the production enterprise of the PX.

We find that this difference has recently been maintained at a very low level of 200 yuan / ton.

Enterprises can face losses, but in a market economy environment, if the price of products falls below the variable cost, enterprises will stop producing.

Therefore, no matter what the fundamentals are, the price of PTA can hardly be further reduced without significant changes in costs.

On the whole, PTA's strong rebound is a correction to the price difference between the spot price and the cost side, even if the supply and demand are worse.

In the future, crude oil and PX tend to be weaker, and PTA is expected to be highly limited.

Through the above discussion, we believe that although the supply and demand pattern of PTA is still weak, but due to the small difference between PTA price and variable cost, PTA urgently needs to repair this difference.

Therefore, cost push is the main reason for the rise of PTA prices.

In the wake of the market outlook, PTA still has room for expansion and is expected to rebound to 4870 yuan / ton, but other factors need to emerge.