PTA mid-term rebound is still expected

Since the Spring Festival, the strong support of the upstream cost of the PTA industry chain and the continuing weakness of the downstream terminal demand have constituted a pattern of long-short confrontation. However, in the context of stable upstream cost support, the medium to long-term trend of PTA mainly depends on the guidance of downstream demand.

Slightly fluctuating upstream cost support and weak downstream demand have led to an increasing influence of crude oil on PTA trends. Although the trend of crude oil in recent days has fluctuated, it has remained at a high level. The geopolitical factors in the Middle East are the main driving force for the rise in international crude oil prices. The continued complication of the Iranian nuclear issue has aggravated the panic in the international crude oil market, causing crude oil prices to rise to pressures of US$110/barrel. However, high crude oil prices will inevitably affect the healthy development of the western developed countries' real economy. Affected countries will inevitably introduce corresponding measures to appropriately suppress higher oil prices. Although governments of various countries may control the rise in oil prices, the resolution of the Iranian nuclear issue will be a long process, coupled with the support for crude oil caused by political turmoil in other Middle East countries. The author believes that high oil price shocks are sustainable.

According to the author's research results, the specific launch of PX's new production capacity in 2012 will be concentrated after September. In the short and medium term, PX's domestic supply capacity will not increase substantially, coupled with the high level of crude oil shocks and PTA production companies' rigid demand for PX. PX's support for PTA will continue to be strong, and the PTA downside will be further reduced.

Some new production capacity is put into production. According to statistics, about 11 million tons of PTA new production capacity is put into operation in the 2012 PTA production plan, but its production time is mainly concentrated in the second half of the year, about 8 million tons or more, although the second quarter has about Three million tons of production capacity are under production, but most of them are concentrated in May and June. Therefore, PTA supply pressure is not significant in the short and medium term. In addition, PTA production profits have been continuously compressed, and manufacturers’ production enthusiasm has been severely frustrated. The time to put some of the PTA devices that were prepared to be put into operation in the first half of the year has also been postponed. Among them, the new production capacity of 1.4 million tons of Yuandong Petrochemical was originally scheduled to test in the first quarter, and was postponed until the end of May; Xianglu Petrochemical's new capacity of 2 million tons of new capacity is expected to be dragged down to 2013. Therefore, PTA supply pressure is further reduced.

Downstream polyester inventory is high After the Spring Festival, downstream production and sales have increased occasionally, but the sustainability is not strong. The main reason is the lack of orders for textile and garment companies, and their cautious attitude toward raw material purchases. So polyester plant stocks are growing rapidly. Recently, polyester short-term stocks are about 14 days, polyester filament POY stocks are about 18 days, FDY stocks are about 21 days, and DTY stocks are about 33 days. A lot of inventory backlog made polyester manufacturers face liquidity challenges and many producers had to cut production. Demand for PTA is further reduced, which also puts pressure on its price.

End demand still needs to be restored Although the traditional demand season is approaching, the demand for the textile market has not yet risen significantly. At present, the operating rate of weaving loom is maintained at around 61%, which is about 10% lower than the same period of last year. For a long time, China's textile industry has relied heavily on exports. This year, China’s labor costs have generally risen. For the textile industry, the increase in labor prices means that the price advantage of China’s textile industry in the international market has been lost to a certain extent. Coupled with the impact of the European debt crisis, export orders have decreased significantly. Demand will continue to be a factor in the upward pressure on the PTA.