PTA market faces downward pressure again

The tight supply of PX has eased slightly since mid-to-late September and the operating rate of PTA units increased quickly to 77%, a 10 percentage point increase from the low of 67% in September. Except for the No.3 PTA line in Ningbo, the rest of the units of Yisheng have basically returned to normal operation, and the 600kt/year PTA plant of Sinopec Yangtze also restarted.

PTA margin have been rapidly compressed from around 900yuan/mt to 400yuan/mt, which is once again below the average level for the year.

In the downstream, the destocking of polyester factories is slow and the polyester polymerization rate basically maintains at the pre-holiday level of 83-84%. Although crude oil rebounded, the price increase of polyester industry chain products was mild and polyester producers still suffered loss.

According to the current supply and demand situation, the PTA inventory is expected to accumulate slightly in October by 50,000-100,000 tons. If the reduction of polyester production in the later period expands, the pressure of PTA inventory accumulation will increase.

With the recovery of the supply, the liquidity of the spot market was improving month-on-month. In September, due to factors such as logistics, futures delivery and downstream feedstock preparation, the PTA spot availability has gradually tightened. But after the holiday, the spot/TA2301 spread narrowed obviously as the procurement of polyester factories has declined and some also sold raw materials, although some cargoes were delayed by the cold wave. The traders under weak expectations actively sold goods on the market.  PTA futures basis weakened on profit-taking selling. The spot/TA2301 spread reduced from a premium of 830yuan/mt on October 8 to around 600yuan/mt today.

In addition to the pressure from inventory accumulation and eased liquidity, the expected new capacities also brings downward pressure on the PTA spot market. With new PX unit of Shandong Weilian Chemical, Shenghong and PTA unit of Jiatong Energy put into production,  the overcapacity pressure of PTA market will increase, which will suppress the PTA profit margin and prices.