Review on PTA Market In June and Outlook

PTA spot market prices in June continued to follow the decline in May. By the end of June, inland PTA price slid down 750 Yuan/ton to 9000 Yuan compared with the beginning of the very month, the decreasing rate was 7.69%. The Taiwan cargo also decreased 70 dollars to 1150 dollars with the rate 5.74%. Korean cargo dropped 75 dollars to 1140 dollars, decreased by 6. 17%. PTA futures in June followed the declining tendency. The price had already broken 9000 Yuan by late June. By the end of the very month, the main force contract 1109 accumulatively decreased 850 Yuan/ton to 8888 Yuan by 8.73%.

A review upon PTA fundamentals in June

Newly added PTA capacity continued to expand. The continuous expansion of capacity caused dramatic non-interest to the PTA market. This year’s domestic PTA capacity is around 18 million ton. Meanwhile, there are 7.5 million ton of new capacity is projected to be put into operation. Domestic supply in China will be more and more sufficient, which will directly pull down the tendency of PTA price.

Tight policy is ongoing. On June 20, 2011, People’s Bank of China increased the deposit-taking financial institutions of RMB deposit reserve ratio once again by 0.5%. Until then, the deposit reserve ratio of large bank reached up to 21.5%, created a historically new high. At the same time, countries like India and Philippines also plan to raise the deposit reserve ratio. The global economic situation is becoming more and more severe.

Electricity shortage is in extension. This year China is facing the most serious electricity shortage over the last decade. Suffering the worst electricity shortage, Jiangsu-Zhejiang area has already taken measures to limit the electricity of high energy-consuming industries. From June 15 to September 5, across entire third season, involving hundreds of chemical fiber textile companies, this electricity limit policy will further inhibit the demand of polyester and PTA.

Contracts’ settlement prices decreased. Far East Petrochemical announced its PTA listed price in July for 9700 Yuan/ton, which decreased 50 Yuan/ton compared with June settlement price. BP Zhuhai announced its PTA settlement price in July for 9700 Yuan/ton, decreased by 50 Yuan/ton. Ningbo Formosa Chemicals announced its listed price in July for 9600 Yuan/ton, decreased by 100 Yuan/ton compared with the settlement price in June. Xianglu Petrochemical PTA Company announced its listed price in July for 9300 Yuan/ton, decreased by 450 Yuan/ton compared with settlement price in June. Sinopec also announced the contracts’ settlement price to execute at 9700 Yuan/ton and decreased 200 Yuan/ton compared with the listed price in June.

Crude oil slumped in June

Crude oil dropped dramatically in June due to the protection of weak recovering tendency of global economy. Until the late of June, the oil standard in New York and London used to go back to 90 dollars and 100 dollars, decreased to the same level in the middle of February this year. International Energy Agent (IEA) said in a statement on June 23 that its 28 member states agreed to take joint action in the next 30 days to release an average of 200 barrels per day to the crude oil market, a total of 60 million barrels. This movement shows the determination that IEA wants to suppress the global oil price. Therefore, the oil price is very likely to drop dramatically again. The first decreasing target will be 83 dollars per barrel. If the afterward market continues to go weak, the price will also be possible to get close to 73 dollars per barrel. There is a clear positive correlation between crude oil price and PTA, the downtrend of oil price is evitable to suppress the PTA market. 

PX price continued to decreased in June

Following the decrement of bulk commodity prices, the market prices of PX, Heterogeneous MX and naphtha also greatly dropped down in June. Till June 30, Asian Heterogeneous MX market price had already accumulatively decreased 22 dollars/ton to 1144 dollars/ton FOB Korea. Naphtha price accumulatively decreased 71 dollars/ton to 906 dollars/ton CFR Japan. Asian PX price accumulatively decreased 109 dollars/ton to 1372 dollars/ton FOB Korea and European PX price accumulatively decreased 116 dollars/ton to 1430 dollars/ton FOB Rotterdam.

Ended by June 30, the price difference between PX and MX was 243 dollars and the difference between PA and naphtha was 499 dollars. At present, the PX manufacturers’ profit is around 200 Yuan/ton, which means the operating rate is high in Asian PX plants. Besides, although domestic PTA devices had maintenance together in second season, the insiders still look highly of the long-term PX price and stocked large quantities of raw materials; this led domestic PX plants nearly had full tank of storage. Hence, even if new PTA device began to operation, PX price would still have been hard to pull up.

Downstream polyester price kept weak tendency

June is a traditional dull season for textile industry. Due to limited orders, increased PTA production and improved supply, the cost support will get weak. Moreover, electricity limit policies and tight currency measures still greatly inhibit the downstream market. The weak tendency of polyester market is difficult to change.

From the price point of view, the polyester bottle chips price on market in June accumulatively decreased 400 Yuan/ton to 12000-12200 Yuan/ton. Semi-dull chips price decreased 300 Yuan/ton to 11700-11750 dollars/ton. PSF price accumulatively decreased 200 Yuan/ton to 12750-12850 Yuan/ton. At the end of June, polyester yarn FDY 50D/72F in Shengze, China was quoted 17400 Yuan/ton; DTY 150D/144F was quoted 16400 Yuan/ton and POY 150D/144F was quoted 14700 Yuan/ton.

Outlook

Because the quantity of newly added PTA capacity was comparatively small in the first half of this year, while more polyester devices were put into operation; the supply-demand pattern of PTA market had little differences. However, since newly added PTA devices are going to be put into production from June to August, the PTA capacity will accordingly increase greatly. Meanwhile, polyester devices will have been cut operation, so the PTA supply will clearly increase then. Moreover, the crude oil price is very likely to drop later, as a suppress force upon PTA, PTA market will face a great non-interest situation in July and the PTA price might continue to decrease.