PTA Market will Meet Spring Festival Weakly

    Last week, the crude oil price increased dramatically influenced by favorable news and the PTA market still remained weak. Since this year, the correlation between PTA and crude oil continued to decrease, which mainly influenced by different factors. In addition, the PTA chain was so long and influenced by many factors, restricting the relation between PTA and crude oil. Therefore, the impact of fluctuant crude oil prices which influenced by the geopolitical will gradually be reduced before the holiday.

    In contrast, the oscillation of crude oil price in high point made PX price keep in high price, which support PTA the cost for the PTA to bring strong. From a historical point of view, the steady downstream demand was an important factor of ensuring smooth transmission for upstream price. Currently the demand was low, the high PX price and the cost support of tight supply were not the main contradiction for pushing PTA price, but the profits of the industry chain will continue to be detached from the middle and downstream, and the upstream will maintain high profits.

    In the perspective of downstream demand, influenced by the low stock in the industry and the stage restocking of some enterprises, the polyester market appeared an obvious rise wave. The rise was the remedy for previous drop, but because the downstream textile industry exports and domestic demand were still low, the chemical fibers market was not likely to increase dramatically and the price will tend to be steady gradually. With the approach of Spring Festival, the continuous pressure of labor cost and capital and reduced downstream operating rate will lead to weak PTA market continuously.  

    Seeing form the replacement rate of cotton and polyester, the cotton price will not increase continuously before the finishing of purchasing and storage in March. When the cotton price was between 20,000-21,200 Yuan, the replacement rate of cotton and polyester will not change obviously. Further more, the downstream demand was low and the cotton price will not push PTA price to increase.

    In summary, the macro aspect lacked substantial favorable news before the holiday, and the US dollar was possible to increase continuously, it will suppress fluctuations of crude oil price caused by geopolitics.
    In the perspective of the industry, the high price of PX was not the main contradiction which will push PTA price under the situation of low demand, and gradually reduced labor costs, the continued financial pressure, and the downstream operating rate will be the main reasons leading to continued weakness in PTA market. The PTA price will remain dropping, and the average price will be suppressed continuously in a long term.