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Research | Time: Mar 31 2021 3:14PM
China's PTA industry moves forward under overcapacity pressure
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China's PTA industry is highly cyclical and has been on course for massive capacity expansion since 2019. Hengli, Yisheng and Honggang have accelerated their integrated development. Polyester companies such as Xinfengming and Billion have set foot in PTA industry too. Under the mismatch of supply and demand, PTA stocks piled up, and the business entered cyclical downturns.

Key points
PTA capacity growth has accelerated since 2019, and has gradually surpassed the polyester capacity, resulted in PTA supply surplus. In 2020, crude oil prices slumped with coronavirus-related low demand. PTA producers continued to operate at a high rate under the support of expanded profit margin, while demand growth slowed down, leading to an increase in PTA oversupply.

The integration of the PTA industry accelerates, and the competitiveness is enhanced. However, PTA profit margin has been compressed to historical lows this year. PTA spot price gains were suppressed by the accelerated outflow of PTA from futures warehouses as the spot basis (spot/futures spread) exceeded the basis of the warehouse receipts (warehouse receipt/futures spread). Meanwhile, the speculative demand decreased after PTA has gradually recovered to pre-crash valuations. In addition, the production cost of PTA has increased also due to the high price of acetic acid, which has aggravated the loss of PTA enterprises.

1. 1. PTA market is oversupplied as capacity expansion accelerates
2. The competitiveness of PTA industry enhances with the large-scale and integrated development
3. Low profit or a protracted war
4. Summary

Chart 1 PTA capacity and growth rate
Chart 2 PTA and polyester capacity
Chart 3 PTA and polyester production
Chart 4 PTA processing margin and capacity utilization rate
Chart 5 PTA plant operating rate
Chart 6 PTA capacity scale change
Chart 7 PTA industry value chain change in 2010-2020
Chart 8 Integrated industry chain profit
Chart 9 PTA inventory trend in China
Chart 10 PTA inventory structure
Chart 11 PTA processing margin and acetic acid price trend

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