According to the commodity market analysis system of the business community, in the first half of 2023, the PTA Spot market has gone out of the situation of first rising, then restraining, and then rising again, which is basically consistent with the trend of the futures market. From the Spring Festival to early April, the market center of gravity continued to rise in stages, and although there was a correction in the middle, the overall upward trend remained unchanged. After mid April, the price fell back from its high point until mid May, when the price hit a bottom and rebounded slightly. As of June 30, the average price of Spot market in East China was 5600 yuan/ton, down 0.29% from January 1, or 16.72% year on year. The highest point appeared on April 17th at a price of 6520 yuan/ton, and the lowest point appeared on January 9th at a price of 5377 yuan/ton.
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Specifically, in early January, with the release of epidemic prevention policies, macroeconomic recovery expectations continued to improve, and the market had high expectations for domestic demand recovery, leading to a clear bullish atmosphere in the commodity market, supporting the continued upward trend of PTA prices. However, downstream construction resumed relatively late after the Spring Festival, and the recovery of the polyester and terminal textile industry market was less than expected, resulting in a decrease in PTA prices under pressure. Subsequently, with a slight contraction in the PTA plant operating rate and a sustained recovery in the downstream, PTA prices stopped falling and rose in mid February. Despite the impact of insufficient downstream PTA orders and low operating costs, PTA prices briefly rebounded. However, due to the tight supply of liquid goods in the PTA market and the expected early maintenance of PX devices in the second quarter, cost support has also been continuously strengthened, and PTA prices have continued to rise.
Phase 2: After mid April, crude oil experienced a significant pullback. In addition, the rising cost situation has put great pressure on the downstream polyester end, resulting in lower order volume and weaker consumption, exacerbating the pressure on polyester inventory. The pressure on the polyester factory is increasing day by day, and in late April, a reduction in production was initiated. The willingness to purchase PTA decreased, and the bearish market atmosphere became evident. PTA prices continued to decline.
Phase 3: From late May to the end of June, crude oil stabilized and rebounded, and with continuous improvement in the terminal and downstream sectors, polyester production also pressed the stop button, and PTA prices began to slowly recover. However, the current PTA social inventory continues to accumulate, restricting the space for short-term price repair.
The production capacity of the PTA industry continues to grow year by year. In the first half of 2023, a new PTA plant, Hengli Petrochemical (Huizhou)’s 2.5 million ton plant, was put into operation in March, while Jiatong Petrochemical’s 2.5 million ton plant was put into operation in May. As of the end of June 2023, the total domestic PTA production capacity is over 76 million tons, of which more than 7 million tons of devices are in long-term shutdown, mostly outdated or lacking integrated supporting devices.
Against the backdrop of escalating overcapacity conflicts, the PTA industry’s low start-up rate and low processing costs will become the norm. However, at present, the PTA market is highly integrated, and the enterprise’s risk management ability is enhanced. Manufacturers balance supply and demand by flexibly adjusting their operations. From the first half of 2023, after the end of the Spring Festival holiday, the production of terminal looms has increased very slowly, with a bottom-up negative feedback increase and a decrease in PTA production rate. With the repair of cash flow, the centralized restart operating rate of PTA devices has been at a high level, maintaining at 70% -80%, and the accumulation speed has significantly accelerated. In the second quarter, PX prices were relatively strong, and PTA factories began to lower negative prices. Affected by the maintenance of several large units in China, the start of construction fell to around 70%. After the production reduction of downstream polyester factories, the inventory pressure has decreased, and the devices have been restarted one after another. The load has increased again, and with the expected production of new PTA devices, the start of construction has increased to 80%. Although there has been a downward adjustment in the middle, there have been many restarts of domestic PTA devices since late June, and the current operating load of PTA devices has increased to over 80%.
PTA Weekly Social Inventory
In terms of inventory, the overall inventory of PTA showed an upward trend in the first half of 2023. After three years of the epidemic, especially in the end market, it became very cautious, so the demand side of PTA has been in a lukewarm state. The process of resuming work after the Spring Festival is slow, with lower consumption of raw materials and faster inventory accumulation. The continuous increase in raw material prices has led to a decrease in the purchasing willingness of terminals. Although there was a slight decline during this period, it was also due to the proactive removal from the warehouse caused by the maintenance of their own devices.
On the cost side, in the first half of 2023, international crude oil showed a broad fluctuation and overall downward trend. According to the Commodity Market Analysis System of Business Society, WTI fell by 10.89%, while Brent crude oil fell by 10.72%. After May, the market volatility range narrowed and gradually bottomed out and stabilized. On the one hand, against the backdrop of slow decline in inflation levels in Europe and America, and the process of interest rate hikes far from over, the outlook for global demand is uncertain, and the risk of economic recession still exists. On the other hand, OPEC+, an oil producing country, is continuously deepening production cuts to limit supply in order to combat the decline in oil prices. In the game between the two, oil prices remain stagnant.
The PX market was boosted by the dual effects of crude oil prices and positive demand expectations before the Spring Festival. With the bullish fundamentals of PX, prices significantly increased. The failure to increase PX production capacity on schedule and the centralized maintenance period resulted in strong PX performance throughout the first quarter. But as Asian PX devices continue to restart and centralized maintenance comes to an end, the weakening of raw materials and downstream has had a significant impact on PX prices. In mid to late June, crude oil rebounded, and PX devices had unplanned negative and production reductions, resulting in a slight rebound in PX prices.
The prices of downstream polyester products showed a slight upward trend in the first half of the year, with polyester DTY increasing by 3.61%, polyester POY increasing by 1.54%, polyester FDY increasing by 0.89%, and polyester staple fiber increasing by 0.91%. In January, prices strengthened due to the increase in international crude oil prices and the positive cost. Due to insufficient follow-up of terminal orders from February to late March, coupled with the expected production of raw material PTA new devices, prices experienced a decline. During the first half of March, due to the boost of international oil prices and a slight rebound in the traditional peak season, it subsequently fell into a downturn. Since late March, PX has entered the maintenance season. The liquidity of the PTA Spot market has remained tight, and the PTA price has strengthened, squeezing the profit of the polyester industry significantly. The factory’s willingness to reduce production has increased, and the price has rebounded significantly. But terminal demand fatigue dragged on, and prices showed a fluctuating downward trend after mid April.
The polyester market as a whole exhibits high production and export characteristics. The polyester industry has added over 5 million tons of new production capacity in the first half of this year, approaching a doubling level compared to the same period last year. It is expected that there will still be over 5 million tons of production capacity planned for the second half of the year, and the annual production capacity growth rate will reach 12.7%. In 2023, with the recovery of terminal consumption compared to the previous year, the overall profit of the polyester end has increased compared to last year. Some production capacity that was not put into operation in the second half of last year due to profit reasons has been delayed until this year. From the first half of the year, the speed of adding new polyester production capacity in China was significantly faster than the market expectations at the beginning of the year. As of now, a new polyester production capacity of 5.3 million tons/year has been put into operation within the year. In addition, it can be seen that most of the new polyester production capacity is concentrated in leading enterprises, and the concentration of industry production capacity has further increased. Seizing market share during the expansion cycle is also an important factor for enterprise management considerations. With the orderly deployment of polyester production capacity and the overall increase in production, the polyester production load was around 90% as of the end of June, significantly higher than the same period last year.
In terms of exports, according to statistics, the cumulative export of polyester from January to May was 4.455 million tons, a year-on-year increase of 16.8%. Against the backdrop of continuous expansion of polyester production capacity in China, various polyester categories have obvious price advantages, and exports are expected to continue to become new production capacity for digesting polyester. However, the high increase in polyester product exports is related to India’s initiation of BIS certification, and companies are rushing to sell in advance. However, with the implementation of BIS certification in India, the export end may be affected to some extent.
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From the perspective of weaving, the demand in the weaving market improved slightly in the first half of the year compared to the same period. From a phased perspective, after the Spring Festival, the production of weaving machines in the Jiangsu and Zhejiang regions steadily rebounded, reaching a high point within the year in early March. However, due to cost and demand pressures, the industry load gradually declined to the end of April. After the May Day holiday, due to the improvement of domestic trade orders and the restart of some factory parking devices, the production of weaving machines only moderately rebounded to around 60%.
From the perspective of terminal consumption of textiles and clothing, the overall trend is showing a mild recovery. In terms of domestic demand, benefiting from the recovery of offline consumption scenarios after the epidemic, textile and clothing retail sales have performed relatively well among various consumer categories. From January to May 2023, the total retail sales of domestic textiles and clothing reached 976.74 billion yuan, of which the total retail sales of textiles reached 561.9 billion yuan, a year-on-year increase of 14.1%; The cumulative retail sales of clothing reached 414.84 billion yuan, a year-on-year increase of 17.4%.
In terms of exports, according to customs export data, China’s textile and clothing exports from January to May 2023 totaled 1182 billion US dollars, of which 568 billion US dollars were exported, a cumulative decrease of 9.4% year-on-year; The cumulative export of clothing and accessories reached 613 billion US dollars, a year-on-year decrease of 1.1%. After the epidemic in January and February, the capacity of domestic factories to undertake orders gradually recovered. The release of domestic supply elasticity in March and April led to a phased return of overseas orders. Export data improved compared to the same period last year, but sustainability was weak. In May, the year-on-year growth rate of textile and clothing exports changed from positive to negative, indicating that textile and clothing exports are still in a weak position.
Looking ahead to the second half of the year, analysts from Business Society believe that the main focus is still on PTA supply and demand. In the second half of the year, another 2.5 million ton PTA device from Hengli Huizhou is planned to be put into operation in July. In addition, PTA devices such as 2.5 million tons from Yisheng Hainan and 1.5 million tons from Ningbo Taihua are planned to be put into operation in the fourth quarter. It is expected that the total PTA production capacity will exceed 80 million tons by the end of the year.
At the same time, considering the limited increase in terminal demand, the realization of new polyester production capacity in the second half of the year may not be as expected, so the PTA supply side will continue to be loose. At present, due to the impact of the high temperature off-season in July and August, the phenomenon of textile enterprises stopping and reducing production has increased, and the enthusiasm for raw material procurement will decrease. Polyester High Tech will face challenges, and PTA will also face accumulated expectations. During the traditional peak sales season of the “Golden Nine Silver Ten”, there may be seasonal procurement expectations in the market, but in the context of weak terminal new orders, sustainability remains questionable.
In addition, from a cost perspective, the weak demand and low supply in the international crude oil market in the second half of the year are expected to fluctuate and adjust widely. This year, the production of new PX devices in China has basically ended, and the incremental benefits brought by the new devices are significant. Moreover, there are not many maintenance plans in the second half of the year, and it is expected that PX supply will maintain a relatively high level. Therefore, PTA cost support is limited. On the whole, it is expected that the price of domestic PTA Spot market will maintain a weak operation in the second half of 2023.
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