Recently, PTA futures prices have fallen sharply, with increased supply and reduced demand being the main negative factors. Looking forward to the market outlook, we believe that PTA prices will not continue to weaken, and range oscillation is the main tone.
Strong cost support
Currently, crude oil prices are about to accelerate During the rising period, the biggest driver comes from the recovery of demand in Europe and the United States. At the beginning of April, only 12% of EU citizens had received at least one dose of vaccine, compared with 46% in the UK; in the week of May 21, the vaccination rate reached 32%, compared with 55.6% in the UK. On May 22, the vaccination rate in the United States also reached 48.6%. Countries in Europe and the United States have begun to gradually unblock, and consumption of refined oil products continues to rise. As early as Easter, April 5, highway mileage in the United States has exceeded the same period in 2019. Although it has fallen slightly recently, the overall trend is still upward. Airports in the United States are also becoming increasingly busy. On May 16, the number of people passing through airport gates reached 1.85 million, a new high since the epidemic. The number of cars on European roads continues to increase. According to highway management company Atlantia, traffic volumes in France increased significantly in the first half of May, with toll road volumes only 10% lower than the same period in 2019, compared with a 35% drop from 2019 a week ago.
The strong crude oil price provides strong support to PTA. In addition, PX, the direct raw material of PTA, is still in the maintenance season. From May to June, India’s OMPL’s 920,000 tons, South Korea’s SK 400,000 tons, and South Korea’s Daesan’s 1.13 million tons, a total of 2.45 million tons of PX equipment were overhauled, accounting for 4% of Asia’s total production capacity. Considering that my country has just carried out large-scale spring maintenance from March to April, the supply of PX is not abundant, and there is no basis for continued compression of the price difference between PX and naphtha.
Terminal consumption is not pessimistic
As of the close of trading on May 24, The spot processing fee for PTA is 400 yuan/ton, and the futures processing fee is 440 yuan/ton. From January 18 to the end of April this year, the PTA spot processing fee was around 350 yuan/ton, and even for a period of time was 250 yuan/ton. From the end of April to early May, PTA spot processing fees briefly rose to more than 400 yuan/ton, and then fell again recently. Therefore, PTA companies had almost no profit for four months this year. In the second half of the PTA production expansion cycle from 2012 to 2014, when the PTA processing fee fell below 350 yuan/ton, some companies reduced their burden and production within two weeks. Therefore, we believe that the ability of PTA companies to bear low processing fees will be significantly weakened in the later period. At present, the volume of PTA warehouse receipts has dropped from the peak of 2.02 million tons to below 1 million tons. Taking into account the futures premium, PTA warehouse receipts can be said to be the most costly tradable inventory in the industry, and the warehouse receipts have dropped to below the same period in 2020. PTA prices will also generate some support.
From the perspective of PTA demand, polyester production and sales have been sluggish recently, polyester inventory pressure has increased, and the operating rate has declined slightly. Considering that textiles and clothing are optional consumption, the gradual unblocking of Europe and the United States will increase the demand for textiles and clothing. China’s sales of clothing, shoes and bags on Tmall and JD.com during Double Eleven in 2020 increased by 11% year-on-year, while the growth rate in the same period in 2019 was only 4.2%. Compensatory consumption of textiles and clothing has clearly appeared in China. If the consumption path in Europe and the United States is the same as that in China, then Chinese textile and apparel orders will be placed one after another in the coming days, and PTA terminal consumption is not pessimistic.
To sum up, we believe that PTA prices will not fall unilaterally. The adjustment low of 4,550 yuan/ton for PTA futures has appeared. Investors can adopt a range-based oscillation approach and reduce long positions when the PTA processing fee is high.
</p
