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PTA: why market liquidity turns tight ?

2022-07-27 08:40:30 CCFGroup

PTA spot/TA2209 spread started to strengthen from mid-June. July spot goods were traded at TA2209+350/360yuan/mt and Hengli Petrochemical offered at 7,020yuan/mt. The logic behind the strong spot/futures spread is mainly the tight liquidity of the tradable goods. Then why PTA supply turns tight ?

 

In some Chinese main ports, the inventory of negotiable goods presented a downward trend from June. On the one hand, with the improvement of logistics, cargo pickup has been accelerated; on the other hand, the amount of arrivals at ports has decreased. Moreover, polyester factories showed more buying interest after PTA prices declined. At the end of June, the negotiable goods inventory in main ports of Zhangjiagang reduced to less than 100,000 tons. Compared with the beginning of May, the inventories of the two main ports decreased by 45% and 27% respectively.

 

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Note: Excluding warehouse receipts and quantities ready for export

 

PTA plant operating rate increased to 75% in mid-June after some PTA units restarted. In June, PTA output is 4.57 million tons, polyester output is 4.71 million tons, plus export volume and non-polyester consumption, PTA supply and demand was largely balanced in June. In July, some PTA units still have maintenance plans, such as Hengli and Fuhaichuang. Sinopec Yangzi and Honggang have no restart plan for the time being, but if the polyester production reduction is implemented, PTA market still faces pressure from oversupply in July. 

 

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Note: the export volume in daily supply and demand is calculated according to the monthly export volume/number of days, which is different from the actual daily export volume.

 

However, there are obvious differences between Jiangsu and Zhejiang.

 

In June, with the alleviation of the epidemic, polyester factories in Jiangsu such as Sanfangxiang and Huahong increased the operating rate. In addition, Jiatong Energy put 2 new polyester units into production. The demand for PTA increased slightly. Meanwhile, Sanfangxiang started to purchase PTA on spot market as the 1.2 million tons/year PTA unit was shut for maintenance, which also verified why the inventory of Jiangsu main port decreased from June.

 

In Zhejiang, polyester factories in Ningbo, Xiaoshan and Shaoxing have reduced or stop production in June.  Although FCFC Ningbo and Yisheng shut the PTA units for turnaround, PTA supply was still sufficient in Ningbo.

 

In spot market transactions, the spot/TA2209 spread for main port source of goods and Ningbo source of goods was different.

 

PTA spot availability in main ports will continue to reduce as Hengli's No.3 and No.5 units both have turnaround plans later. However, with the restart of Yisheng Ningbo's No.4 unit, the regional supply of goods is relatively abundant. Therefore, the regional supply and demand mismatch will continue in the short term, but if the regional price difference expands later, the regional supply of goods will be reallocated.

 

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