PTA spot/futures spread firms as liquidity tightens

PTA spot and Sept futures contract spread has strengthened from a premium of 100yuan/mt in early June to 200yuan/mt, but weakened gradually due to a less of buying activities. However, the spread firmed from a premium of 160yuan/mt in mid-June to 200yuan/mt again now.

Although PTA market supply and demand gradually turned balanced from mid-June, the spot market liquidity tightened. In supply side, Yisheng Petrochemical shut PTA units in Hainan and Ningbo for maintenance; Fuhua cut the operating rate of PTA units to 50% in early and mid-Jun. Therefore, the spot market supply is mainly reply on Hengli Petrochemical. After mid-Jun, the goods held by the traders reduced greatly and the port inventory was also in downtrend. The traders and PTA suppliers were reluctant to sell at low prices, particularly after Fuhua announced turnaround plan in mid-July.    

In demand side, polyester producers showed more buying interest after PTA prices declined and some traders also needed to purchase for covering the short. Moreover, some PTA producer also purchased on spot market. In addition, PTA warehouse receipts totaled 37,271 lot, equivalent to 186kt, but the warehouse receipts were mainly registered in Jinlun (south China), Jianfa and ITG  (drayage is charged). The traders and polyester producers preferred spot goods .

Fuhua temporarily became a market buyer from a seller due to the turnaround plan in July. Yisheng has sold a large number of goods from July to August. If Hengli’s maintenance plans on two PTA units are implemented, the supply of available goods will be limited in the later period. Therefore, traders are reluctant to sell July goods.

However, the sales of polyester products remain weak recently, and the product inventory is approaching the high level of the year, which will suppress the increase in polyester polymerization rate.