Polyester Demand Will Weaken Or How Can PTA Turn Against The Wind In The Coldest Season?

Saudi oil heart bombed

In mid September, when the impulse of crude oil rose, the price of PTA futures rose sharply. With the gradual extinction of geopolitical events, PTA futures become weaker varieties in chemical futures.

Analysts say the market will return to fundamentals after the pulsate effect of the event has subsided. Under pressure from two aspects of supply and demand and cost, the pressure of PTA falls sharply. PTA prices are expected to remain weak in the four quarter.

Fundamental pressure highlights

Since the new high of 5456 yuan / ton on 17 September, the price of the 2001 main contract of PTA futures has been decreasing, and the lowest price in September 30th is 5036 yuan / ton, the lowest since August 22nd.

According to digital analysts, after the attack of Saudi oil refinery in September 14th, domestic chemicals generally came out of a rally under the influence of crude oil. However, with the impact of the Saudi incident gradually fending off, the previously expected higher chemical products have been callback, of which the largest decline in PTA, has fallen below the location of the attack before Saudi Arabia.

Demand side: with the arrival of the gold and silver ten in the spun apparel industry chain, the seasonality of demand side has become an important support for the PTA price since September. But in 2019, the peak season was more "temperate", and the risk aversion of all sectors in the downstream industry chain was aggravated. The raw materials used for polyester raw materials tended to adopt a relatively cautious attitude, resulting in insufficient incentives for raw materials demand. On the other hand, the downstream profits of the industrial chain continued to be weak, and the willingness of manufacturers to expand their operations was not strong. Procurement was mostly based on rigid demand, and it was difficult to further boost demand.

The supply side: the fourth quarter of the new Feng Ming first phase of 2 million 200 thousand tons and Hengli Petrochemical 2 million 500 thousand tons of equipment put into operation is expected that if the two sets of devices can produce smoothly, will bring our country nearly 10% of the supply of PTA increment, if the load is full, the monthly output will increase about 400 thousand tons, which will undoubtedly bring more pressure to the PTA supply and demand side.

The cost side is becoming a drag.

In addition to the fundamental bad price trend, the recent cost side does not support the PTA price rise.

After the Saudi incident, international crude oil prices rose rapidly, and the price of PX as a direct downstream product of crude oil also rose rapidly. However, the logic of crude oil production was subsequently falsified by Saudi Arabia, and international oil prices were falling. PX prices, which lacked much support from fundamentals, were also hard to maintain.

From the perspective of supply and demand of PX itself, after 7-8 months, the maintenance and repair of large units such as Hengli and Fuhua dropped down, and the supply and demand side had been alleviated. In September, the output of these units gradually returned, and at the same time, 800 thousand tons of Sinochem and 1 million 500 thousand tons of Brunei were gradually put into operation. It is expected that the supply side will increase substantially. On the other hand, due to the early PX's inventory and the relatively good processing profit of PTA, the market's enthusiasm for purchasing PX is relatively high, and the import side will also increase by a certain extent.

In addition, from the profit distribution of the industrial chain, the profit distribution of the polyester industry chain has been controlled in the PX-PTA interval for a long time since the large-scale refinery plant was put into operation in 2018. Higher economic efficiency has also brought about intensified industrial competition. After entering 2019, PX and PTA both entered a period of rapid growth in capacity. Upstream manufacturers gradually had difficulty in controlling pricing power, and profits in industrial chain began to shift downward.

After the gradual decline of the impact of the Saudi attack, the price of PTA returned to the basic logic. There is a clear negative factor in both the supply and demand of PTA itself and the upstream cost. The PTA price in the four quarter is expected to continue to run weak.

Price changes of upstream related varieties before and after National Day

Varieties	Company	Nine 30 June	Ten 1 June	Ten 2 June	Ten 3 June	Ten 4 June	Ten 7 June
WTI	USD / barrel	Fifty-four point zero seven	Fifty-three point six two	Fifty-two point six four	Fifty-two point four five	Fifty-two point eight one	Fifty-two point seven five
Brent	USD / barrel	Sixty point seven eight	Fifty-eight point eight nine	Fifty-seven point six nine	Fifty-seven point seven one	Fifty-eight point three seven	Fifty-eight point three five
Naphtha C+F Japan	US dollar / ton	Five hundred and five point six three	Four hundred and ninety-five point two five	Four hundred and ninety-seven	Four hundred and eighty-four point eight eight	Four hundred and eighty-eight point eight eight	Four hundred and ninety-two point eight eight
PX	US dollar / ton	Seven hundred and ninety-four point one seven	Seven hundred and eighty-nine point three three	Seven hundred and eighty-nine point two five	Seven hundred and eighty point five	Seven hundred and eighty-nine point three three	Eight hundred and two point three three

Source: lung Chung

As of October 8th, the PTA market operating rate dropped to 85.98%, down 4.38% from September 30th. In the early days of the National Day holiday, 700 thousand tons of Hon bang, 1 million tons of Sichuan power and 900 thousand tons of Jiangyin Petrochemical were resumed. In the first trading day after the holiday, Hengli Petrochemical 2 million 200 thousand ton PTA plant entered the overhaul state, and the commissioning of the new 2 million 200 thousand meter new device delayed until November, resulting in a high supply situation and a slight improvement in market mentality.

Polyester Market holiday, production and marketing performance is relatively light, resulting in a slight increase in inventory. The terminal market warp knitting machine has been resumed, and the water jet weaving starts to recover slowly, so the inventory of grey fabric has not changed significantly before the holiday.

At the same time, pre - and downstream manufacturers have almost finished the stock preparation, maintaining the previous judgement of weak demand. Recently, although the sale of polyester chips at lower levels has been promoted, the effect is not good, and the high inventory of terminal grey cloth causes the downstream customers to prepare more carefully. In addition, the recent increase in the maintenance of the PTA device has no obvious effect on the lifting of the PTA price center. Since the polyester will enter the low demand season, and the new Feng Ming device is about to go into operation, the oversupply of PTA will gradually become apparent. Even if there is no "black swan" incident in the crude oil market, the price center of PTA still has much room to move downward. Source: COFCO Futures Research Center, China Securities Daily, long Zhong information, chemical fiber Huixin new media