PTA: increase in maintenance plans, will inventory reduce ?

The cumulative production of PTA in the first quarter reached 17.45 million tons, with a year-on-year increase of 23.6%. Polyester production also saw a substantial growth rate of around 24%, reaching 17.42 million tons in the same period. PTA inventory accumulation was around 1.05 million tons by the end of the first quarter. The significant inventory buildup has led to a downward trend in PTA spot basis and compression in processing margin. Many PTA producers announced plant maintenance recently, so the market is hopeful for a substantial reduction in inventory later.

Based on the maintenance schedule, the operating rate of PTA in April is expected to decrease, reaching a low point of around 71%. If we exclude other losses outside the planned maintenance, the estimated production in April would be around 5.6-5.65 million tons.

In terms of demand, as polyester filament yarn sales expanded at the end of March, the inventory pressures has greatly eased and the filament plants are expected to keep operating rate stable. The average monthly polyester polymerization rate in April is expected to increase to around 92%. PTA exports are currently maintained at 250,000 to 300,000 tons per month. Therefore, the supply and demand situation for PTA is improving, with an expected inventory reduction of around 150,000 to 200,000 tons in April. With the implementation of PTA plant maintenance and further increases in polyester polymerization rate, the port inventory may reduce later. Spot basis may strengthen gradually, but considering the current high levels of port and futures warehouse inventories, there may be limitations on the extent of the increase in basis.

In May, the inventory reduction for PTA may be even greater. Aside from FCFC, Weilian Chemical, and Jiaxing Petrochemical Phase 2 undergoing maintenance, Hengli, Yisheng, and Honggang also have intentions for PTA plant maintenance. If these maintenance plans are implemented later on, PTA production is expected to remain around 5.6 million tons, and if polyester polymerization rate remains around 90%, the expected inventory reduction would be around 250,000 to 300,000 tons.

In summary, in the second quarter, as PTA plant maintenance increases and supply and demand improve, inventories are gradually being depleted. However, despite the tightening liquidity, the overall inventory has increased since the beginning of the year and there may be changes in maintenance plans due to the improvement in processing margin. From this perspective, the sentiment for PTA is cautiously optimistic.