PTA inventory continues to reduce in August

Some PTA plants delayed the turnaround plans from late July as the profit margin recovered, but several PTA units were shut unexpectedly due to mechanical problems. The plant operating rate dropped to around 70% by the end of July. The plant maintenance remained intensive in early Aug, and the regional supply will still be tight, but with the units restarting, the supply tightness may ease. Based on the maintenance plans announced, PTA output in August is estimated at 4.65 million tons.

The cash flow of polyester products has been compressed as the price increase lagged behind the feedstock price increase. In late July, PET bottle chip, fiber chip and staple fiber plants lowered the operating rate. However, regional supply tightness still exists and the feedstock of some plants was in shortage due to transport problems caused by epidemic. The polyester polymerization rate dropped to 91.3% If the cash flow of polyester products could not improve, the polymerization rate may not climb up obviously later. The polyester polymerization rate is estimated at around 92% in August. PTA inventory is expected to reduce 100kt in August, less than that in July.

Major PTA producers continued to cut the contract supply. Yisheng Petrochemical cut the PTA contract supply to 80% and Hengli Petrochemical cut the PTA contract supply to 40% in August. But the spot market liquidity may continue to ease in August. Yisheng New Materials and FCFC's PTA units will resume production and more tank trucks will ease the regional supply tightness. On the other hand, main ports reopened after the typhoon and the cargoes have been discharged gradually. The port inventory and goods on-transit both increased recently.

Crude oil market retreated as the OPEC+ agreed to boost crude oil output from August and more countries imposed movement restrictions amid a surge in coronavirus cases. At the same time, PX-naphtha spread is unlikely to expand further due to the commissioning of new unit and less maintenance. From the perspective of PTA market fundamentals, PTA inventory may continue to decline in the first half of August and then pile up again. PTA prices may fall from high in the short term.