PTA market sees steeper than expected decline – ChinaTexnet.com
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PTA market sees steeper than expected decline

2021-11-04 07:58:15 CCFGroup

    l China's thermal coal futures declined for seven consecutive days.

    l Chemical products led the declines in the commodity contracts.

    l WTI futures prices fell from a high of $85.41/barrel to a low of $80.58/barrel.

    l Ministry of Commerce has agreed ZPC to import 12 million tons of crude oil in 2021

China's thermal coal futures slumped after the National Development and Reform Commission (NDRC) held a meeting for limiting the thermal coal prices on the morning of October 27 to further clarify the price limit details. Most of the commodity contracts closed with losses, with the ferrous metals and chemical products leading the declines. Weekly EIA data showed U.S. crude oil inventories have increased sharply. At the same time, Russia has begun to replenish natural gas inventories for EU countries. Iran's nuclear talks are about to resume. Crude oil prices fell sharply under many short-term negatives. WTI futures prices fell from a high of $85.41/barrel to a low of $80.58/barrel.

PX-naphtha spread is compressed obviously, from $179/mt to $141/mt, particularly after Rongsheng Petrochemical announces on October 25 that the Ministry of Commerce has agreed Zhejiang Petroleum & Chemical Co., Ltd., to import 12 million tons of crude oil in 2021 for its Phase II refining and chemical complex. ZPC will ramp up operating rate of its three crude distillation units (CDU) and PX plant operating rate may also increase later.

The decline of PTA futures expanded this week, with the most active PTA contract for January 2022 delivery (TA2201) down from above 5,500yuan/mt at the beginning of the week to an intraday down limit of 5,048yuan/mt today. The decline in PX and PTA prices is greater than the decline in crude oil.

Although the power rationing is easing gradually after October 20, the downstream polyester polymerization rate still remains at around 84% due to weak sales, while PTA plant operating rate recovered to 82.5% after some units restarted after maintenance.

However, PTA margin has not been squeezed as part of goods were transferred to the futures delivery warehouses, greatly easing the oversupply pressure on the market. Meanwhile, with PTA prices down, polyester plants show higher buying intention.

Under the backdrop of downturn in energy and chemical markets, PTA market temporarily loses the support from cost side. Coupled with the oversupply, PTA price decline expands. In November and December, PTA inventory is expected to accumulate as not many PTA producers have maintenance plans and polyester polymerization rate is hard to increase. But considering the sufficient storage capacity of futures warehouses, PTA spot price decline is expected to be limited and may probably follow the trend of cost.

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