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Insight | Time: Oct 30 2018 10:28AM
PTA market may rebounds under changes in fundamentals
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Since late October, news about unexpected shutdowns of PTA units have been heard frequently including Hanbang's Phase II (2.2 million tons) and Pengwei (900,000 tons); Hanbang's Phase I (700,000 tons) and Yangzi Petrochemical (600,000 tons) . Some units have restarted after short-term shut and some remained closed. After the PTA-PX spread is compressed to a very low level, the "accidents" continue to increase. According to the current industrial operation, some PTA producers may lower operating rate or close units.

The supply of PTA in the fourth quarter should be significantly lower than previously expected. In Oct and Nov, PTA plant operating rate has dropped to yearly low due to spate of scheduled or unexpected shutdowns.

On the demand side, the polymerization rate has gradually shifted upwards, and it has remained at around 88% so far. However, PET bottle chip market was relatively weak in the short term due to the off-season demand. The main bottle chip plants have lowered the run rates and the product inventory was generally high. Although the operating rate of the filament plants has gradually moved upwards, the inventory pressure is still not low after the depreciation of inventory in October. It is estimated that the average monthly polymerization rate in November-December is around 88-90%.

PTA supply and demand may probably be in a balance or the inventory slightly reduce in the fourth quarter.  In addition, with several PTA units into shutdown and PTA-PX spread squeezed to very low level, PTA suppliers and polyester producers become more actively in spot trading, so the spot availability will keep at a tight balance. 

It is expected that the sales of polyester products may improve periodically at the end of October, thus encourages the raw materials market; on the other hand, with the procurement of polyester producers and PTA suppliers, the PX-PTA spread may be expanded and PTA market may stabilize or slightly rebound later.

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