PTA: destocking slows as units restart in May

PTA margin expands to around 500yuan/mt

PTA supply reduced sharply in April as many units were shut for maintenance, while polyester polymerization rate remained high and export was robust. PTA inventory slashed by over 450kt in April. 

With the easing inventory pressure, stable demand from polyester plants and contract supply cut of major PTA producers, PTA profit margin has recovered to around 500yuan/mt. 

May PTA inventory to reduce 100-150kt

Although Yisheng New Materials delays the start of 3.5 million tons/year PTA unit, the PTA output may still increase obviously in May due to the restart of many PTA units after the maintenance. According to the turnaround schedules, PTA supply in May is estimated at around 4.5 million tons.   

Terminal orders remain sluggish as the demand in peak season is less than the expectation. The cash flow has been compressed as the polyester producers frequently offered discount for sales promotion under inventory pressure. Some PET fiber chip plants have cut the output and PSF plant operating rate also lowered. However, the cash flow of PFY is tolerable. The polyester polymerization rate is estimated at 92-93% in May.  

Besides, PTA exports also showed signs of decline recently due to worsening epidemic in India and high freight rate from Asia to Europe. The export volume in May is expected to drop to around 200kt. PTA inventory is estimated to reduce 100-150kt in May. 

Market trend

PTA spot market liquidity tightness eases recently with more warehouse receipts flowing into the market and supply of PTA producers increasing. The futures basis narrowing may be capped.  However, the strong upstream crude oil and PX market is supportive to PTA market.