PTA: some changes in fundamentals around the Spring Festival

PTA spot market negotiations were deadlocked, and the basis was weak before and after the Spring Festival. Some spot goods were traded at a discount of 5yuan/mt on May 2023 futures contract (TA2305) yesterday. With the opening of futures market, it is expected that the spot market negotiations will gradually pick up. This article summarizes some changes in fundamentals around the Spring Festival.

PX prices move up

During the Spring Festival holiday, crude oil fluctuated at a high level and moved down later, but PX continued its upward trend, rising from $1,052/mt to $1,076/mt during the Spring Festival holiday.  

Operating rate picks up

PTA plant operating rate started to pick up quickly from late Jan. Except for the unexpected shutdown of Zhongtai’s 1.2 million-ton plant, the pre-overhauled plants have been restarted one after another. In addition, the new plants are running well. Dongying Weilian’s 2.5 million tons/year PTA unit runs at 80%, Jiatong Energy’s 2.5 million tons/year unit runs at 90%.

PTA inventory rapidly accumulates

Downstream polyester product inventory reduced due to tolerable sales and the profitability improved. However, due to the impact of the Spring Festival, some factories continue to shut down, and the polyester polymerization rate in late Jan remained at around 64%. Based on the operating rate of upstream and downstream, the average daily inventory accumulation in the middle and late Jan is around 20,000 to 30,000 tons.

From the perspective of PTA inventory distribution, PTA inventory transferring from upstream to downstream was slow, affected by factors such as logistics and weather. The inventory of PTA factories has accumulated to varying degrees. The port inventory increased slowly. Inventory at Zhangjiagang and Zhapu changed little compared with before the holiday.

In general, PTA seasonal inventory accumulation in January-February is expected to be at a level above 1 million tons, due to the current high operating rate of PTA plants, which will have downward pressure on PTA margin and basis. Considering the high cost, expected demand recovery and reducing raw material stock, polyester producers may increase the procurement after the holiday and the PTA inventory will gradually shift downward in the later period. The market sentiment is still optimistic now, which will support PTA prices in the short term.