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PTA margin down below 100yuan/mt despite the up-limit in futures

2022-03-15 08:04:07 CCFGroup

The conflict between Russia and Ukraine is intencified. Many countries released crude oil reserves, but failed to ease worries about crude oil supply shortage. Crude oil hit multi-year highs. Crude oil prices rose to $110 a barrel on Mar 2, up more than 6% in the day. PTA futures followed up, with TA2205 contract closed to 5,988yuan/mt, up 6% . However, PTA margin dropped to 93yuan/mt, the lowest level since June 2014.If acetic acid cost is taken into account, PTA margin have dropped to negative values.

In addition to the support of the rise in crude oil, the large gains in the price of naphtha is supported also by the high price of natural gas. Moreover, the sanctions imposed on Russia, a major supplier of naphtha also triggered the worries of the shortage of naphtha supply in Asia. Naphtha mopj trading closed up at $1009/mt CFR in the day, up $110/mt from previous day. PX price increased to $1206/mt, up by $81/mt from the day before.

Due to the continuous decline of margin, PTA producers announced more maintenance plans.PTA output contraction is obvious. In terms of demand, the polyester polymerization rate remains high at around 92% . PTA inventory is estimated to reduce, but the reduction is relatively slow.

Company	Capacity (kt/year)	Location	Operation
Sinopec Yangzi	600	Jiangsu	runs normally, T/A plan from Mar 22 to mid-May
Sinopec Yizheng	350	Jiangsu	shut on Mar 1-Mar 20
Yisheng	2000	Ningbo	shut on Feb 10 and delays the restart
Yisheng	2250	Liaoning	shut for maintenance on Feb 24
Yisheng	2000	Hainan	T/A in Apr
Ineos	1250	Guangdong	T/A in late Mar
Hengli	2200	Dalian	runs normally, 20-day T/A plan on Apr 10
Hengli	2500	Dalian	runs normally, 20-25 day T/A plan on Mar 10
Dushan Energy	2500	Jiaxing	T/A plan
Zhongtai	1200	Xinjiang	26-day T/A plan in mid Apr
Fuhua	4500	Fujian	O/R at 80%

Many PTA cargos are still piled up in the docks and the PTA stock at polyester plants are also at high level due to poor sales of polyester products. In February, the average production and sales ratio of polyester filament yarns is estimated to be around 65% (in terms of output, sampling survey), down 17 percentage points from January. Therefore, under the pressure of high inventory, the profit of the polyester industrial chain is difficult to improve.

In the short term, PTA prices may stay high with the support of cost, but the recovery of PTA margin will still depend on the production cut and actual inventory consumption.

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