Nearby-month PX and PTA strengthen on inventory reduction

The spread of May/Sep futures contracts widened rapidly for PX and PTA on Apr 25, indicating calendar spread opportunities, and reflecting the inventory reduction of PX and PTA.

As CCFGroup has forecast earlier, since March, both PX and PTA have begun stock-reduction. However, due to US tariff hikes, crude oil price declined in Apr, and concerns over weakening consumption exacerbated. As a result, PX and PTA prices dropped and the economics worsened. PX units are now operating at losses and PTA plants are also operating near break-even line.

Currently, the earlier market concerns over polyester operating rate cuts may get eased. Though downstream twisting, weaving and dyeing and printing plant operating rate have dropped persistently, and could further fall during May-Day holiday, the overall polyester plant operating rate is likely to see limited downward space in May.

PET bottle chip and PSF margins remain acceptable. As for PET bottle chip, orders are placed in advance, and with feedstock price falling, PET bottle chip operating rate has been hiked gradually in Apr and seems unlikely to fall in the near term. As for polyester PFY, despite the relatively high inventory and the losses in FDY, producers have no strong intention to shut plant as feedstock prices are quite low and POY margin is decent. Therefore, it is estimated that average polyester plant operating rate could hover at 91~92% in China in May.

On PTA front, poor profitability continues to drive plant maintenance.

According to CCFGroup's investigation, PTA plants of Yisheng Dalian, Jiatong Petrochemical, Hengli Huizhou, Hengli Dalian, FCFC Phase II, Jiaxing Petrochemical and Honggang would undergo maintenance in May. PTA operating rate is expected to drop by more than 1 percentage point to 81.5% in average in May, despite the restarts of Zhongtai, Energy Investment as well as FCFC Phase I.

China PTA inventory is projected to reduce by 500,000 tons in May, and the combined reduction in Mar-May is estimated to reach 1.3~1.4 million tons. The earlier inventory accumulation since 2024 till Feb 2025 amounted to 1.25 million tons. And therefore, high inventory situation of PTA is expected to alleviate after May.

As for PX, though demand for PX is restricted by PTA plant maintenance, PX inventory is expected to reduce by about 300,000 tons in China in Apr, owing to planned turnarounds as well as unexpected production cuts due to worsened economics. In the first quarter of 2025, PX inventory increased by only 20,000 tons, and therefore, some plants are in a shortage of PX and enter to buy, relieving the delivery pressure for May PX futures contracts. It also drives up nearby month PX prices with limited liquidity.

In the near term, PX may see supply tightness in some regions, as polyester operating rates remain relatively stable without significant cuts. Meanwhile, PTA prices could face some suppression in nearby months due to available delivery inventories acting as a buffer. Looking further ahead, attention should be paid to whether PX tightness could trigger unplanned PTA production cuts, leading to unexpected supply reductions.

Assuming polyester demand declines in slow pace, PTA is likely to continue destocking in June. For PX, supply and demand could be balanced in May but the inventory could continue to reduce in Jun (based on the scenario where a 2 mln mt/yr line undergoes maintenance in Jun).

The sustainability of polyester operating rates ultimately depends on end-user demand. Current weakness is evident-weaving and dyeing run rates have declined noticeably, and polyester PFY inventories remain high, and there's uncertainty whether it could get relived.