Supply and Demand Tight- PTA May Have Great Increase after Chinese New Year

Since the New Year, the tendency of PTA price has been very firm. 1105 contract price keeps climbing up and is getting close to 11, 000 Yuan/ton. The spot goods prices stay at above 10, 000 Yuan. The outskirt price easily broke through the 1, 250-dollar resistance level and rose up to 1, 300 dollars.

Firstly, the crude oil price keeps running at a high level

Recently, many of the U.S economy data statistics showed a good side; the winter busy season of demand has come; the crude oil stock keeps reducing in U.S., which push the international crude oil’s price increased to 90 dollars/drum and hit a new high since recent 27 months. It is predicted that under the increasing demand, the loose currency policy and the transference of commodity index funds, the crude oil price will keep running at a high level and is hopefully to test the 100-dollar mark. This firm performance gives a strong mental support for the chemical variety.

Secondly, the tight supply-demand upgraded and the PX price continues to climb up high

Since the New Year, the PX price continues to climb up high. The general contract settlement is around 1, 380 dollars/ton CFR in January, in Asia, which greatly increased 105 dollars/ton compared with ACP last December. The PX listing exercise price of Sinopec is 11, 000 Yuan/ton in January, which regulated up 800 Yuan/ton compared with last December. Because the 550-thousand-ton/year PX device of Malaysia AMSB accidentally shut down in Kertih; the PX supply situation became even more severe in Asia and stimulated the PX price increasing to the highest point of 29 months. It is predicted that the February’s supply of the settled and delivered goods will be intense and the increasing trend may continue until the first season. Because the profit of PTA is great, the operation load will keep high and the demand for PX is strong; the PX price is hopefully to keep an up-going tendency which will accordingly promote the PTA cost.

Thirdly, the newly added polyester capacity is put into circulation in succession.

With the coming of the end of the lunar year, the market has already entered a maintenance concentrated period. Presently, there are 10 set (2 million tons) polyester devices planning to shut down and arrange maintenance, which take up 7% of the overall polyester capacity. According to former experiences, January and February are busy seasons for maintenance of the polyester factories every year. However, there is little possible for all these devices having maintenance together in a short term, and obviously they are going to have it separately. It is predicted that the domestic polyester-device operation loads will gradually drop to 80% from the highest 85%-87%, which means the PTA supply will approximately decrease 90-100 thousand ton/month. Whereas, around Spring Festival, manufacturers like Xinmin, Hengli, Rongsheng, Xinfengmin, and Guqiandao are planning to put 1.4 million polyester devices into operation successively, which shows a potentially strong demand for PTA. The PTA supply-demand pattern keeps tight.

Fourthly, the end of lunar year is coming and the downstream prepare demand is falling back

Went through the stocking up of the downstream weaving factories at the beginning of the month, and under the cost support of polyester material, the PFY price steadily rebounded 1, 000- 1, 500 Yuan/ton. Now the market has entered a rest period before Spring Festival, and the PFY stock pressure for the mainstream manufacturers is not big. They reported that the POY storage is 8-10 days, FDY 10 days around and DTY 12-15 days. Since the mid of this months, the main weaving factories have been going to have Spring Holidays in Jiangsu-Zhejiang areas. The pre-holiday stocking up has come to a conclusion and their stock can mostly be used till Spring Festival. Before Festival, great fluctuation is unlikely to happen; the PFY market has entered rest period and the price will slightly oscillate in a steady environment.

Lastly, PTA spot goods keep firm and the manufacturers’ profit rise again

Pushed by the terminal users’ active stocking up before Spring Festival and influenced by the newly added polyester capacity which is predicted to put into circulation and the supply gap which caused by the terminal users who actively find spot goods for contracts. Since 2011, the mainstream suppliers’ contract goods supply has generally been reduced. The reducing supply and the demand for opening position before the Festival both stimulates the terminal users’ positive buying action in China. The increasing situation of the PTA spot market is reviving, and the spot goods’ price is firmly above the 10, 000 mark. At the mid of January, Sinopec, BP Zhuhai, and Far East Petrochemical reported that the PTA contract price regulated up to 10, 500 Yuan/ton and Yisheng Petrochemical’s PTA contract price up to 10, 600 Yuan/ton. Therefore, the PTA manufactures’ spot goods profit grew up to 1, 400-1, 800 Yuan/ton.

Overall, PTA will show a strong fluctuation in a short term. See from the mid term, the expected domestic inflation, the tight supply-demand, the promoted cost and the stock up requirements will all support the PTA market and the futures price of PTA is expected to keep up an increasing tendency. The bull market after Spring Festival is worth waiting.