In the future, China's PTA market will face heavy expansion pressure. The long-term supply and demand fundamentals of PTA are bearish, and the rebound of the futures price may not be optimistic.
On Monday, driven by factors such as the People's Bank of China's RRR cut and the preliminary agreement between Greece and international rescuers, the domestic commodities market overall opened higher. However, due to the continued existence of Greece's default risk, plus the heavy fundamentals of PTA, PTA futures opened higher but closed lower. Since the medium and long-term supply and demand fundamentals of PTA remain bearish, the rebound of PTA may not be optimistic.
Greece's debt risks still exist
Over the weekend, the Greek government agreed to implement a new financial compression plan, and the Greek government reached a basic agreement with international sponsors. On Monday, the Eurozone finance ministers' meeting will decide whether to agree on the second round of rescue plans for Greece. If not approved, Greece will face debt default. Currently, the market generally estimates that the possibility of approval is relatively high. If it passes, it will constitute a certain short-term benefit to the commodities market. However, the European Central Bank announced that it would accept bank loans as collateral for refinancing operations, which seems to indicate that Germany intends to expel Greece from the Eurozone.
Even if the Eurozone passes the rescue plan, facing Greece's declining economic state, this model of borrowing new debts to repay old ones still cannot completely prevent Greece's future default. In addition, recently, the Bank of Japan unexpectedly announced an increase in loose monetary policy strength. The scale of the newly added asset purchases and lending plan of 10 trillion yen has created certain conditions for stimulating economic recovery. Over the weekend, the People's Bank of China announced a 50 basis point RRR cut, signaling that the reserve requirement ratio has officially entered the reduction channel, indicating that China's monetary policy tends to loosen, which is a short-term benefit to the domestic commodities market. However, the Chinese government still emphasizes the need to stabilize prices, making it difficult for the domestic money market to truly loosen.
The cost-driven effect may weaken
Affected by factors such as the Iranian geopolitical crisis, WTI crude oil has strengthened again recently and reached a new stage high, while also driving naphtha prices higher. However, PX prices have not fully followed, but instead have seen some pullback due to the weakness of PTA. This indicates that under the situation where PTA profit margins are almost non-existent or even at a loss, the pressure for further increases in PX prices is relatively large. Currently, the spot price of PX in the Asian region hovers around $1600/ton, with a price difference of about $550/ton compared to naphtha, and the price difference with MX also hovers around $240/ton, indicating good profit conditions for PX companies. Additionally, there will be three sets of PX equipment under maintenance in Asia in February, keeping supply tight. Combined with the current strong oil prices, the overall downward space for PX is limited. Considering that the current PX price has largely reflected the tight supply situation, the cost-driven effect on PTA may weaken in the future. For PTA to rise in the future, it will need to rely on improvements in demand or expected demand.
Significant medium-term adjustment pressure
After experiencing several years of low-speed expansion, China's PTA market will once again face a peak production phase in 2012. Following the start-up of BP's 200,000-ton PTA capacity expansion at the beginning of the year, China will see another 2.7 million tons of PTA capacity expansion from Far Eastern Petrochemicals and Tongkun Group in April and May, and even more significant PTA capacity expansions in the second half of the year. In terms of timing, part of the PTA capacity expansion coincides with the traditional spring peak season for PTA, which might offset some of the benefits brought by improved demand expectations. The large-scale new capacity expansion is the main reason for the bearish medium and long-term supply and demand fundamentals of PTA.
Regarding demand, the downstream demand for PTA has not yet fully started, and the improvement in demand or expected demand may not occur until March. After the Spring Festival, the开机 rate of major weaving production bases in Jiangsu and Zhejiang provinces has continued to increase, with most weaving factories resuming operations. However, they generally report a lack of orders, with many finished fabric sales being slow. Many weaving factories still have relatively high inventory levels of finished fabrics, reflecting the continued sluggishness in the terminal market demand for PTA.
In summary, looking at the medium and long term, the fundamentals of PTA are bearish, facing significant adjustment pressures.