Terminal Demand Slowdown Constrained PTA Price

    Since last year, the polyester capacity expanded greatly, and the PTA capacity also started to expand, but the capacity expanding upstream PX speed is low, and the terminal demand began to slowdown. There is a situation of expanding in the middle and tightening in the both ends in the “PX-PTA-PET-textiles and apparels” industry chain. Where the PTA market to go?

    First, PTA and polyester capacity expanded fully

    The domestic PTA capacity will reach 20,060,000 tons after the new equipments put into production. According to 90% of operation rate, the mouthy producing volume is about 1,500,000 tons; according to 556,400 tons of average mouthy import volume in the second half of last year, the PTA mouthy supply volume is about 2,050,000 tons. This year more polyester new capacity out into operation, but considering the tight capital supply and restrict demand, the new capacity put into operation practically is less than planned. According to the 3,600,000 tons newly increased capacity the market approved generally, the polyester capacity will be 33,000,000 tons in the next half of the year. According to the 87% operation rare, the mouthy output is 2,390,000 tons and requiring 2,050,000 tons PTA, which is accord with the estimated PTA supply volume. Thus, the PTA supply is in balance tightly. 

    Second, PX supply in balance tightly

    At present, because of the big statistic standard differences, the PX production capacity is different. According to CCF statistics, as Fujia Dahua will stop in mid-September to prepare for relocation, while CNOOC will restart in late October, the domestic PX production capacity will be only 7.46 million tons from September to October. According to 90% operating rates, the monthly domestic production volume will be 559,500 tons, and the output will be 612,000 tons from November to

December. The domestic PX has relied on imports to make up the gap straightly, from March to July in this year, the average monthly PX import volume was 390,000 tons, in July the import volume reached 430,000 tons. Thus, the PX supply volume should be 960,000 tons from September to October, while in November will be 1 million tons. If all the PTA plants operate normally, and the average operating rate is 90%, the PX monthly demand will be 1 million tons, taking into account the early stocking and PTA plant maintenance and other factors, PX supply could meet the demand of PTA plants basically. In addition, the current market concerned that the Asian PX plants maintenance from September to October will affect the PX supply, thus pushing up PX prices. If this situation does occur, then the Asian high PX prices may attract PX in other areas to enter. According to CCF statistics, global PX supply is abundant. Therefore, from the perspective of industry chain, if all devices in industry chain are functioning in accordance with established plans, the various aspects of supply and demand will in balance, and the raw materials is not likely in shortage, so we shall hold the cautious bullish attitude to PX price.

    Third, Slowdown demand restrict PTA price

    From the perspective of cloth output in this year, the overall volume is lower than in last year. Some professionals believed that the textile industry situation in this year is even worse than when in the financial crisis period. At present, the recession possibility of euro zone increased, and the speed of U.S. economic growth has been cut once, so the pessimistic global economic situation will affect the textile industry demand. Latest data shows that the domestic new export orders index fell sharply by 2.1% to 48.3%, which is the first time dropped within 50% since May, 2009. It is the evidence of the severe export situation. More over, the tight capital in this year affected the investment of textile industry, and new projects are reduced, thus the terminal textile industry fell into a difficult period.
From the general regulation, the textile industry may digest the bubble produced in the boom time in three bad years and one good year. Through the prosperity in second half of 2009 and 2010, the textile industry in China will fall into the downturn, and the pressure will gradually pass upward through the chain, restricting the price of raw materials. This is a main reason for bearish PTA market in a long-term.

In short, although the current PX supply shortage is expected, and PTA futures price is likely to continue to rise, the slowdown in terminal demand will affect the cost delivery of industry chain, in turn, it will restrict raw material prices, so the demand side will determine the prices of PTA. In Short term, PTA price will be firm supported by the high price of raw materials, but in long-term, the price will slow down under the pressures of demand-side. In technical point of view, PTA futures price walk along the drop A wave and the rebound B wave in the drop process after the Spring Festival, and it is more likely to along with oscillation C wave next, which consistent with fundamental analysis.