PTA inventory increment less than expected despite of new units

In December, two new PTA units finally started production. One of the production lines of Dongying Weilian’s 2.5 million-ton plant was put into production around December 7, and had on-spec products around December 14. Jiatong Energy fed one line of its 2.5 million-ton PTA plant on December 21 and had on-spec products around December 24.

However, the PTA inventory did not see obvious accumulation in December, and the port inventory has been maintained at a low level. On the one hand, the operation of the new unit is not stable, and the output is relatively limited; Yisheng New Materials reduced the operating rate of its 7.2 million tons/year PTA units; Energy Investment shut the 1 million tons/year PTA unit unexpectedly. The operating rate of PTA plants dropped again to around 60%.

In addition to the decrease in the supply side, the slowdown in production cut of downstream polyester plants has also brought support to the PTA market. In early and mid-December, as the epidemic control policy changed and the crude oil price dropped to around US$70/barrel, the speculative demand from downstream mills increased. Some polyester filament yarn producers slowed down the production cut seeing lower product inventory. The polyester polymerization rate has dropped from 72.8% in early December to current 66.8%.

It is estimated that the PTA inventory may increase 100,000 tons in December, less than previous estimation. 

The operating rate of existing units may not change much later later. Hengli and Yisheng will remain shut; Fuhaichuang runs at lower rate; Energy Investment and Ineos may not restart in the short term; FCFC Ningbo may shut shortly. The PTA output increment in January may mainly from the new units, which is still limited by demand or raw material supply. From the demand side, speculative demand is declining, and with the continuous increase in the number of infections and the approaching Spring Festival, the operating rate of polyester and textile mills are still facing downward pressure. From the perspective of exports, considering the weaker demand and the contraction in the long-term PTA contracts in the new year, the export volume may decline.

Overall, under the pressure of continuous increase in the output from new units and weakening demand, PTA market still faces seasonal inventory accumulation pressure. According to the current situation, PTA inventory in January is estimated to increase around 400,000 to 500,000 tons.