PTA Entered A Rare Profiteering Era

Ended by yesterday, the domestic PTA spot price has reached up to 11, 850 Yuan/ton; while the futures price was much higher. According to the present PTA cost, 9,500 Yuan/ton, almost 25% of the industrial profit rate, leads the PTA manufacturers to a rare profiteering era.

Insiders indicate that, if compared with the low point in last May, while the increasing rate of crude oil price was only 20%, the PTA increased more than 70% in the corresponding period. This brings extraordinary profits to the PTA manufacturers. Besides, the relative listed companies, like Sinopec Yizheng Chemical Fiber Company, Sinopec Shanghai Petrochemical Company, ZhuhaiPort and Rongsheng Petrochemical Company, are hopefully to get benefits from it.

Profit rate is closed to 25%

“Last year this time, the domestic PTA cost was around 7, 000 Yuan/ton and the price was 8, 000 Yuan/ton, so the profit gap was only about 1000 Yuan/ton with a 10% profit rate. This could be a high profit in the industrial chain. However, at present, PTA price has increased to 11, 850 Yuan/ton, while the cost is only 9,500 Yuan/ton. The gap has been enlarged to 2, 350 Yuan/ton and the rate is closed to 25%.” He Yuexiang, an analyst at Toocle said yesterday.

Some relative analyst indicates that, if totally calculate at the oil cost, theoretically speaking, the present PTA price would only be around 8,800 Yuan/ton. If calculated according to 8,800 Yuan/ton, the profit rate will be as high as 34.6%.

By report, PX is mainly extracted from the oil. However, since past few months, the increasing rate of international oil price has never gotten close to it of PTA price.

“No matter compared with the crude oil or the relative chemical products, the increasing rate of PTA price is always big. Judged by the oil price, the NY crude oil futures price is still lingering about 85-90 dollars/drum. Compared with the low point in last May, while the increasing rate was only 20%, the PTA increased more than 70% in the corresponding period.” said Shi Yingfeng.

Withal, an analyst indicates that the increasing rate of PX which is the raw material of PTA, is far below it of PTA itself. This is the major background of the boost of PTA profit. He thinks that PTA has entered a rare profiteering era.

The push power of the price comes from the high cotton price

“The push power of PTA price mainly comes from the high cotton price.” the above-mentioned analyst expresses that, as the direct alternate of cotton, PTA’s downstream polyester products is directly pulled by the cotton price, especially the cotton blending PSF products. At present, Zhengzhou Cotton has returned to 33,000 Yuan up. If calculated at the normal price ratio, 2-2.5, the reasonable price of PTA should be among 13,000-16,000 Yuan/ton, “which means if it was relative to the cotton price, the present price of PTA is not highly estimated.”

From his point of view, because the strong trend of PTA depends on the cotton price, the judgment of PTA in the afternoon market should analyze in accordance with the cotton price too.

“It mainly depends on the consumption. After the Spring Festival, the weaving market would have entered the traditional busy season. The mill use of the cotton would have increased and their purchasing intention would have been strong. I predicted that the growing tendency would be hard to change. While in the mid term, we should wait to see if the yarn price can effectively conduct. See from the operating situation of the weaving industry under the high cotton price in the other half year of last year, we think highly of the spring weaving demand.” the analyst said.

It’s worth noting that a large number of newly added polyester devices will be put into operation at the first half year of 2011. However, the newly added PTA capacity will not liberate step by step until the next half year, which leads to a continuous short PTA supply in the first half year. Moreover, the polyester manufacturers have made great profit for the next half year of last year; even the products might be overstocked, their producing enthusiasm will not be affected.

“Therefore, if we would like to judge the afternoon market of PTA, we should take the combination of international oil price, cotton price and weaving market into account. I predicted that at least the PTA price in the first half year will be comparatively firm.” At present, in A stocks market, companies that relate to the PTA include Sinopec Yizheng Chemical Fiber Company, Sinopec Shanghai Petrochemical, ZhuhaiPort and Rongsheng Petrochemical etc., the influences upon them are respectively different. Because Rongsheng Petrochemical has enlarged the PTA’s occupation among the revenue, it will earn greater profit in this run of boom cycle. An administrator in Rongsheng said, “For our company, except the part of PTA products which is for our own usage, there is still part of them for export sales. This is the reason why we can enjoy the advantage of the increasing PTA price.”

Insiders consider that the investment volume for PTA projects is huge, but it is not completely open at home; and the investing period is comparatively long, which is at least 3 years. Therefore, in the industrial boom cycle, blind extension is not likely to happen. If the cotton price kept running at a high level, the domestic PTA manufacturers will be the long-term beneficiary