August China PTA market balance forecast

PTA plant operating rate fell to a yearly low of 65.5% after Jiaxing Petrochemical and Hengli Petrochemical shut PTA units for turnaround recently.

More PTA producers in China have announced turnaround plans since late July due to PX supply tightness, low PTA margin and unexpected mechanical problems. According to the turnaround schedules, PTA output in August is estimated at 4.45-4.5 million tons, down from July.

In downstream market, DTY and fabric mills purchased polyester filament yarns and staple fibers intensively for preparing the stock after PTA and MEG futures rebounded. The inventory of PFY and PSF both declined. Moreover, the cash flow of polyester products slightly improved after the prices stabilized. Some polyester plants restarted the units, pulling up the polyester polymerization rate, but the further increase of the rate still depend on the operation of large polyester producers. According to our estimation, polyester polymerization rate is expected to increase to 82% in August. In other applications, DOTP plant operating rate is less than 50% and PBT plant operating rate is about 50%, so the demand for PTA is still dull. The export volume in August is estimated at 250-300kt as overseas demand continue to reduce.  

Based on the estimation of supply and demand of PTA, PTA inventory in August is expected to reduce 100kt.

However, the market liquidity tightness is gradually easing as main PTA producer continued to sell goods on spot market and the port inventory slightly increases, which will suppress the spot/futures spread.