Shouchuang Futures: Crude oil prices soften, downstream increases production cuts, PTA futures continue to adjust

Spot market: In East China, PTA prices are 6,450 yuan/ton, down 285 yuan/ton from the previous trading day. For March main port delivery, it is quoted at a 05 discount of 60–75; offers at a 65–80 discount were discussed and成交 (negotiated) to trade. For April main port delivery, it is quoted at around a 05 discount of 40; offers at a 55 discount.

In terms of supply: due to upstream raw material supply issues, Yizheng New Materials’ 7.2 million-ton PTA unit is planned to run at 30% reduced rates starting April 1. Subsequently, Yizheng’s other plants will adjust operating rates according to raw material conditions. As cost fluctuations have been extremely volatile, after the spot PTA processing margin was sharply compressed, domestic units have seen more shutdowns and production reductions.

In terms of demand: end-market demand is weak, and polyester product inventories are rising rapidly. Major filament producers have further increased production-reduction cuts from 15% to 20%, and the reduction period has been extended from the end of Q1 to the end of April. Going forward, the reduction ratio will be expanded again based on conditions in both upstream and downstream sectors.

In short: the disruption in crude oil supply is still ongoing, and in addition, the processing margin has been sharply compressed, so the PTA maintenance schedule has increased. However, due to pressure from funding and inventory, downstream polyester filament producers have expanded their production-reduction cuts. With both PTA supply and demand weak, and under cost-driven conditions at present, it is expected that in the short term PTA futures prices will continue to adjust downward/sideways. Focus on the price trend on the cost side and changes in unit operating rates. (CITIC Futures)