Impact of yuan depreciation on PTA market

After the U.S. Federal Reserve announced a 50 basis point hike last week, its largest increase since 2000, the Dollar Index has risen as high as 104.19, a fresh 20-year peak, which triggered a depreciation of the renminbi, euro and yen. 

The recent depreciation of the RMB has directly driven the increase in the cost of PTA.  In recent years, with the development of refining and chemical integration, China’s PX self-sufficiency rate has increased, but the monthly import volume of PX is still around 1.1-1.2 million tons, accounting for 40% of the total supply. 

The higher cost further squzeezed the PTA margin which has been under the pressure of oversupply in May.  In China domestic market, PTA supply surplus is estimated to be around 100,000 tons as PTA plant operating rate recovered from low, while polyester polymerization rate keeps at around 80% in the first half of May and is estimated at 82-83% in May. Under the pressure of higher cost and oversupply, PTA-PX margin in China domestic market has been compressed from above 500yuan/mt to 165yuan/mt yesterday. 

However, the depreciation of the RMB is a big positive factor for the export market. The overseas demand is acceptable, and the PTA margin in USD market is still above $100/mt. Traders and PTA suppliers show great enthusiasm for exporting. PTA exports of China may improve in the later period.