The firmness of upstream materials has formed a strong and continuous cost support for PTA, but the weakness in downstream demand has become the hardest-hit area in the PTA industrial chain. This is also the main source of pressure on the price trend of PTA since the end of 2011. With the upcoming convening of the two sessions, there is little possibility of a significant drop in PTA prices. As March approaches, if the traditional peak season for demand can indeed reopen the demand space for downstream markets, the balance of the opposing forces in the PTA industrial chain will be broken, and the dominant force driving a significant rise in futures prices will prevail.
PTA supply pressure has not yet become prominent. Recently, crude oil prices have soared, once exploring a high position of $110 per barrel. Upstream aromatics, influenced by this positive news, have risen collectively, showing a strong cost support for PTA. However, due to weak demand in downstream terminal markets, PTA finds itself stuck between rising and falling. Analysts believe that the future trend of PTA mainly depends on the demand situation in the downstream market. As the traditional peak season for downstream demand approaches, it is expected that PTA may see a significant rise in March.
Continuous improvement in downstream demand is an important factor in alleviating the price pressure on PTA. Currently, the sales of downstream polyester products are weak, and inventory pressures for terminal products continue to increase. Recently, with low market confidence, terminal market stockpiling has been cautious. Additionally, the lack of export orders after the Spring Festival has led to pessimistic market sentiments. Although the operating rate of downstream weaving machines has increased somewhat, the finished products produced mostly turn into inventory, posing challenges to liquidity. According to statistical data, March to August is traditionally the peak season for textile exports, and March is also the peak consumption season for China's textile industry. After March, large inventories are expected to be converted into funds, significantly boosting the production enthusiasm of downstream enterprises, thereby substantially increasing the demand for PTA.
Upstream cost support may continue. Driven by rising crude oil prices, PX prices have shown slight increases, with a minor reduction in PX production profits. From the 2012 PX capacity expansion plan, most of the new capacities are concentrated in the first half of the year, especially in the second quarter. Although some new capacities may have already been released in the first quarter, they cannot form large-scale supply capabilities in the short term. With the arrival of the PTA demand peak season in March, the tight supply format of PX in the medium-short term will not change. It is expected that PX's cost support for PTA will remain sustainable.
The peak season for polyester consumption is approaching. Recently, under the impetus of improving macroeconomic conditions, international crude oil prices have surged significantly. The EU reached an agreement on Greece's second bailout plan, easing Greece's default risk again, which has boosted the market; the increase in U.S. crude oil inventories was lower than expected, providing support; geopolitical issues in Iran have intensified, increasing investors' concerns about possible interruptions in Iran's oil supply, which is a major factor in the sharp rise in oil prices. In addition, unstable political situations in Yemen and other places threaten the oil supply in the Middle East region. Despite governments possibly controlling rising oil prices, the resolution of the Iranian nuclear issue will be a long process. Combined with the support for oil caused by political instability in other Middle Eastern countries, it is estimated that oil prices may fluctuate in the short term but are likely to remain generally strong.
Currently, PTA inventory levels are not high. Recently, although the demand for PTA from the downstream polyester market remains sluggish, the rigid demand for raw material PTA still exists. Production companies smoothly deliver PTA spot goods to polyester factories through contract shipments, converting them into product inventories for polyester enterprises. Recently, polyester capacity expansions are ongoing, and the demand for PTA from downstream polyester enterprises is increasing, so PTA will not face supply pressure in the medium-short term.
Although the long holiday has passed, the operation rate of PTA equipment has seen a significant recovery, but currently, production profits are low, with some production companies experiencing losses, affecting their production enthusiasm, and there are signs of a decline in the operation rate.
In 2012, approximately 11 million tons of new PTA capacity faces commissioning, but the commissioning time is mainly concentrated in the second half of the year, with over 8 million tons, while the second quarter commissioning is concentrated in May and June, at about 3 million tons. Although 300,000 tons of new capacity were commissioned in the first quarter, it is difficult to form actual market supply capabilities in the short term. Therefore, it is expected that the supply pressure on PTA in the medium term will not be obvious.
In March, PTA may see a significant rebound.