PX: The Last Straw of Polyester Industry?

In recent times, the whole polyester industry follows strong and upward trends and PX market has the most outstanding performance. Judged from the price trends of different products, except PX which had small rebound, other products basically stayed stable in November. However, influenced by the surge of PX, PTA and chips market also showed booming tendency since December. At present, Asian PX price has successfully risen to as high as 1,634 dollars/ton, up 5.56% compared with the price of early this month, which is closed to the highest level within the year. In addition, the negotiating price of PTA increased to 8,450 Yuan/ton in domestic market, when it rose 3.68%, and the price of polyester chips had risen to 10,250 Yuan/ton, up 3.01%.

Although December is the traditional off-season demand, the weak polyester industry has improved under the support of strong cost. Many manufactures raised its offer of the December contract goods. For example, the PTA contract price rose to 8,800 Yuan/ton in Zhuhai BP Chemical Co. Ltd. and Hengli Petrochemical, an increase of 200 Yuan/ton than before. Moreover, Hengyi Petrochemical also raised the contract offer of polyester chips in December, 2012. The semi-bright, light, film grade and industrial yarn chips were quoted at 10,600 Yuan/ton, up 300 Yuan/ton.

The total production capacity of PX in Japan ranked third in the world. Meanwhile, Japan is the largest importer of Chinese PX and is also the important determinants of PX price in the Asia-Pacific region. On March 11th of last year, a 9.0 magnitude earthquake occurred off Japan’s east coast, which caused the secondary disasters of the tsunami and nuclear leak etc. It affected the production of some PX devices in the local and the shipment had also delayed. Furthermore, PX price pushed up to 1,840 dollars/ton of the historical highs from 1,600 dollars/ton of that day of the earthquake. However, the earthquake happened again in Japan on December 7th of this year. The earthquake area had no any PX production devices, but we didn’t know whether it would impact on the transportation. Perhaps it brought a powerful excuse to hype PX for the market participants.

Judged from the own links of PX, owing to the difference of the market supply and demand structure, PX price continued to rise. The PX consumption kept continuous double-digit growth since 2010, which was driven by the substantial increase of the PTA capacity in China. In addition, the average growth of PX capacity in the global market was less than 7% in the past two years, so it made the overall operating rate nearly climbed to 90% and the effectiveness was significantly improved. Calculated from the profits of PX products, recently the market situation of naphtha was given priority to a small-scope fluctuation, but MX price had continuously risen. The naphtha market price rose 17 dollars/ton to 937 dollars/ton CFR Japan within a month. However, the MX market price had gone up 150 dollars/ton to 1,407 dollars/ton FOB Korea, an increase of 11.90%, which was far higher than the PX growth. Therefore, the PX market also had a strong cost support.

In the aspect of PTA, there was a huge difference between PTA future price and spot price, the difference in price once pulled up to 500 Yuan/ton and the PTA futures suffered heavy losses. However, along with the continuous strength of 1305 contract, the main contract price of PTA was closed at 8,220 Yuan/ton in Zhengzhou Commodity Exchange on December 10th, up 1.76% on the day, the difference between the future price and the spot price reduced to 180 Yuan/ton and presented the rising situation of the holdings in the futures. Overall, the PTA market was still optimistic in the short term.

Generally speaking, along with the expectation of the cost and tight supply, the strong situation of PX was difficult to break in the short term. The firm market of PX could become the last straw of the polyester industry, brought a new wave of bright market for the polyester products, which made the polyester industry out of the sufferings of haze temporarily.