PTA price increase stuck as inventory piles up

At the end of January, following the failure in restart of Zhongjin Petrochemical's 1.6 million tons PX plant in East China, PTA market rebounded. The main PTA futures contract has set a new high since March 6, 2020. At the same time, with the strengthening of the spot/futures basis, the PTA spot price rose to above 4000yuan/mt.

The extended maintenance of PX unit has directly contributed to the agreement on ACP in February at $705/mt. At the beginning of the month, the spot price of PX rose to $735/mt, and the PX-naphtha spread expanded to $200/mt.

However, the overall PTA supply is expected to be around 4.35-4.4 million tons in February, still a relatively high level. Yisheng Ningbo's 2 million tons PTA plant will resume production in early February.　In addition, Fujian Billion's the other 1.25 million tons PTA line will also start production in early Feb.　

In terms of demand, as the Spring Festival approaches, more polyester plants have been shut for turnaround. The polyester polymerization rate has dropped to 83% and is expected to recover slightly after the holiday. The polyester polymerization is estimated to be around 85-86% in February. In addition, the demand from non-polyester factories have also improved compared with previous years. The shutdown of DOTP plants have significantly reduced compared with the same period in previous years, and the operating rate has increased. PBT plant operating rate is expected to remain around 50-60%. The demand for PTA from non-polyester sector is estimated at 140,000 to 150,000 tons. On the whole, PTA inventory accumulation is expected to be around 600,000 tons in February.

The amount of forecast PTA futures warehouse receipts has gradually decreased since January.　With the acceleration of PTA inventory accumulation, the tight spot liquidity will gradually ease. In addition, as the price of PTA continues to rise, the willingness of polyester factories to stock up raw materials has also declined. PTA market is expected to face high inventory pressure after the holiday. Therefore, as the spot/futures and warehouse receipt/futures spread both narrowed, the selling intention of traders increased. In the short term, PTA market is still relatively strong under the support of costs, but the uptrend may be restrained by more supply. In the later stage, we will pay attention to the overhaul of PTA units and the expansion of the futures delivery warehouse storage space.