During the May Day holiday, the U.S. banking crisis continued to simmer and concerns about economic recession continued to dominate the market sentiment. Oil prices fell sharply, down more than 7% compared with before the holiday; as of May 3, the price of naphtha was 584 US dollars / ton , down $50/ton, or nearly 9%, from before the holiday; the price of raw material PX was $1,019/ton, down $48/ton, or 4.5%, from before the holiday. The PX processing fee slightly increased by USD 2/ton to USD 435/ton compared with that before the festival, and the converted PTA cost fell by about 251 yuan/ton, and the PTA spot processing fee fell to around 820 yuan/ton (the pre-holiday processing fee of PTA was about 550 yuan/ton) .
On the whole, although PX is still in the destocking stage in the short term, the PX maintenance equipment in the early stage will be intensively restored in May, and the downstream polyester negative feedback in the industrial chain will continue to reduce production, and the PX support is weak in the future. During the May Day holiday, the short-term PTA load remained at a relatively high level near 80%.
The price of crude oil fell
Originally, crude oil prices performed strongly due to OPEC+ announcing more-than-expected production cuts. As the market digested the news of production cuts, interest rate hikes and recession expectations began to dominate the trend of oil prices again. At present, the market continues to be pessimistic about the demand for crude oil, coupled with the decline in the cracking price of refined oil, the willingness of refineries to process has declined, and the prospect of crude oil demand is not good.
U.S. demand for motor fuel fell sharply ahead of the peak summer driving season, suggesting consumers are limiting gasoline spending.
Morgan Stanley has lowered its Brent price forecast to $75 a barrel by the end of the year. The bank believes that the prospect of tight supply in the second half of the year has weakened, while the downside risk of Russian supply has largely disappeared.
A few days after OPEC+ members began cutting output, there are signs that supply remains ample, while demand has been disappointing.
Periodic weakening of demand
In addition to the downward shift of the cost side, the negative feedback of the terminal demand also puts great pressure on the price of PTA. Judging from the demand performance this year, the performance from January to mid-March is better. On the one hand, there are indeed domestic sales orders, and on the other hand, more demand comes from the replenishment demand at the end of last year. However, after entering the second half of March, the demand began to decline significantly. The start-up of the weaving link continued to drop to about 62%, and the start-up of the texturing link dropped to a minimum of 65%. Negative demand feedback is gradually transmitted to the polyester segment. The polyester segment had little inventory pressure before. However, under the continued weakening of the terminal, polyester began to accumulate inventory, coupled with falling prices, the risk of inventory depreciation increased, and polyester factories began to continuously reduce production. As of April 27, the comprehensive start of polyester production has dropped to 85.9%, and it is expected to drop to about 83% after the "May 1st" holiday. Under the reduction of polyester production, the demand for PTA declined in April. However, from the perspective of the whole year, the overall demand will show a weak recovery. Affected by the "May 1st" holiday, enterprises are more willing to stop work.
There is not much pressure on the spot
PTA’s recent demand has negative feedback, but its own supply is relatively high. In April, the average operating rate of PTA was around 80%, which was at a high level in the past year. From the perspective of marginal changes in supply and demand, PTA has changed from a state of tight supply in March to a balanced supply and demand. However, the current basis of PTA is relatively strong. In the process of price decline, the basis and monthly price difference are still relatively strong. The basis of the 2309 contract before the holiday is about 540 yuan/ton. This means that the price drop in this wave is more of a downward repair for the overvalued PTA. Although the fundamentals of PTA are marginally weaker, the relative pressure on the spot side is still not great, the inventory level is neutral, and the warehouse receipts are low.
Based on the above analysis, the recent price drop of PTA is mainly caused by the crude oil on the cost side and the demand side. However, the current oil price has entered the undervalued range, and attention should be paid to its supply-side support, and it is expected to stop falling in the later period. In addition, the negative feedback of demand is expected to come to an end, and we will pay attention to when the polyester load will stabilize and rebound in the later stage.
The polyester market continues to be under pressure
For polyester filament, the loss of raw material support and the double pinch of terminal demand shrinkage. In the next week, polyester products will show a weak situation of falling prices and shrinking production. The return after the festival coincides with the Fed raising interest rates, and the overall market is still uncertain. Before the festival, the average operating rate of the pure polyester yarn industry was 74.43%; the domestic weaving industry started at 54.29%; from the textile data, the average number of days for terminal weaving orders was 11.44 days. Over-delivery of domestic summer orders, insufficient new orders to follow-up.
The support on the cost side is gradually weakening, the negative feedback of downstream weaving enterprises is increasing, and some weaving manufacturers are expected to heat up slowly after the May Day. Risk aversion, but it is the off-season of traditional demand, the contradiction between supply and demand in the market is difficult to alleviate, and the market still has downward expectations.
Demand performance is not good, the industry has a wait-and-see mentality, and the production and sales data of polyester filament factories are not performing well. It is expected that polyester filament yarn will show a weak and stable trend in the later period, and attention should be paid to the start-up of the industry and changes in production and sales data.
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