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2010-10-22
PTA market advanced in the first half of Oct and the prices hiked straightly. Most suppliers were reluctant to sell. The PTA futures market also firmed up. After the spot prices touching $1050/mt and 8500yuan/mt, market players began to show different opinions on the trend and signs of a correction emerged.
As RMB appreciation accelerated, inflation expectation also strengthened, which laid the basis for current market rebounds.
Since Sep 2, RMB began appreciate sharply. According to data, during Sep 2-Oct 14 (31 trading days), RMB depreciated only in 7 days and appreciated by 2.3% accumulatively against the dollar. Stimulated by the quantitative easing policy of US Fed, Asian currencies all showed rarely-seen prosperity. Exchange rates of won, Singapore dollar, Thai baht and Malaysian ringgit all reached a record high level for several weeks/years/even history. As a result, the influx of hot money is bringing the risks of overheated economy, pushing up domestic asset price bubbles and enhancing inflation expectation.
In 2009, large amount of currency was put into the market in order to accelerate the recovery of macro-economic system. However, in 2010, excessive currency began to show its adverse effects. Based on the seasonal trend of price movements and excessive amount of currency, monthly CPI rates (y-o-y) are unlikely to fall below 3%.
Feedstock prices surged, providing support to downstream products.
Due to a weaker dollar and increasing demand for crude oil in winter, IEA raised its global oil demand forecast on Oct 14 to 8.69 million and 8.82 million barrel/day for 2010 and 2011 respectively. Crude oil prices rose back to $80/barrel. With intensive maintenance plans of PX units, PX supply tended tight and the price soared from $1061/mt in the beginning of Oct to current $1273/mt FOB Korea, up about 20%. Based on the highest level of $1295/mt CFR last week, production cost of PTA has moved above $1000/mt. The profit of PTA was once squeezed to $50/mt, the lowest in 2010. Higher cost began to push PTA market up.
Supply will keep slightly tight on a spate of turnaround.
Soaring PTA price is contributed not only to the high feedstock but the inventory. PTA plants have always operated in high profit and high run rate, but polymerization rate also kept high this year. Although social inventory of PTA has piled up in the first half of this year, large proportion are transferred to the traders’ inventory. Generally, the supply and demand is in balance. But the annual maintenance of many PTA producers recently and startup of some new polyester capacities led to a supply tightness in Oct. Moreover, sales of polyester products were favorable from Oct, so the producers became active in preparing materials.
Maintenance schedule
1.BP Zhuhai shut a 900kt/yr PTA unit on Oct 12 which would be under maintenance for about 5-6 days.
2. FCFC Ningbo started 2-week turnaround since Oct 7.
3. MCC Ningbo closed its 600kt/yr PTA unit on Oct 12 for 3-4 days.
4. Shanghai Petrochemical shut down 400kt/yr PTA unit on Oct 8 for around 25-day turnaround.
5. Pengwei Petrochemical lowered operating rate of 900kt/yr PTA unit to 50% since early Oct.
65. Yisheng Dahua's 1.5 mln ton/yr PTA unit started 8-day maintenance this weekend.
7. Samsung Petrochemical closed the 450kt/yr No 2 PTA unit for 10 days and restarted on Oct 12. No.4 700kt/yr unit will also have turnaround from Oct 17 for 10 days.
8. FCFC's 550kt/yr PTA unit in Mailiao will also have 4-day turnaround in mid Oct.
9. Malaysia BP's 650kt/yr PTA unit was closed recently for 5-6 days.
PFY Demand Stable, Cost transferring Smooth
Entering Oct, PFY varieties widely moved up by 1000-1500yuan/mt cumulatively and the majority has hit historic highs. Along with the price increase, trading volume remained basically stable with a tight inventory in most PFY plants. The inventory of POY, FDY and DTY was averagely at 3-5, 3-5 and 10-12 days. Besides, PSF plants generally have pre-sold about 6-8 days of products. According to CCF survey, run rates in major downstream textile bases lingered at high levels. Rigid demand still exists and some new orders may arrive in the end of the year thus market sentiment of polyester raw materials kept secured. The cost transferring along polyester industrial chain presented smooth as well.
The buying intention of traders and polyester producers at $1050/mt weakens and some of them have turned to the contract. In the short term, the PTA market will have correction, but the range will be limited as crude oil price is likely to remain above $80/bbl and profit of polyester plants kept good.
$1=CNY 6.65
source:CCFGroup.com
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