PTA: cost and macroeconomics drive price increase

PTA futures saw a widening increase on Friday afternoon, with the TA2039 contract closing at 6,098yuan/mt, a rise of 3.01%.

Despite the impact of typhoon weather, logistics in some areas of South China and East China were affected, resulting in temporary stagnation in transportation in some areas of South China and suspension of operations at some docks in East China. This led to a decrease in dock inventories. However, both upstream and downstream currently have sufficient inventories, and it has not yet affected the operation of upstream and downstream facilities. PTA spot basis has mainly been negotiated around TA2309+10 to 15yuan/mt.

Looking at the fundamentals, the increase of PTA plant operating rate has slowed slightly. Zhongtai Chemical delayed restart;Dushan Energy were undergoing maintenance, and Fuhaichuang maintained the operating rate, while the restart time for Sanfangxiang has not been confirmed. The PTA plant operating rate is expected to remain around 80% in the short term. Even if Dushan Energy restarts next week and Hengli #5 is shut for maintenance, the operating rate is expected to be maintained. The polyester polymerization rate may stay high, with improvements in exports and relatively low inventory. Additionally, downstream prices have moderately followed the uptrend. At present, PTA processing margin has decreased to around 200yuan/mt, showing limited downside and demonstrating a certain degree of resistance to decline.

On the cost side, crude oil has risen, and PX is relatively stronger than PTA. There are no new PX units scheduled to be put into operation in the near future. Due to the high operating rate of PTA and polyester plants, the supply and demand dynamics for PX are difficult to form effective accumulation, resulting in a relatively strong performance on the fundamental side. Furthermore, the gasoline cracking spread has recently widened, and PX-naphtha spread is still showing a strong performance.

In addition, the investors still add long positions on PTA futures, providing support to the market.

The recent strength in PTA market is not solely due to strong supply and demand fundamentals. Although the inventory expectations have changed due to various factors, actual inventories have not accumulated significantly. The surge in PTA is primarily supported by cost and macroeconomic sentiment. Although PTA prices have risen, the overall industry profits are still concentrated in the PX segment. With rising prices and compressed profits, it remains to be seen how PTA and downstream enterprises will navigate their operations in the future.