Downstream operating rates are steadily recovering, and PTA is expected to stabilize and rebound.

Currently, macro risks are suppressing market sentiment for commodities. The uncertainty of the US imposing tariffs on Canada and Mexico, along with news that OPEC+ plans to increase production in April, is putting downward pressure on crude oil and energy chemicals. However, from April to May, there are more PX facility maintenance plans both domestically and internationally, coupled with the expected recovery in terminal operating rates. These series of factors are prompting an improvement in the supply and demand dynamics of PX. Against this backdrop, PTA is expected to stabilize and rebound.

PX maintenance market kicks off

The recent trend in the crude oil market has been rather complex. The US repurchase of SPR and increased sanctions on heavy oil-producing countries have prompted a rebound in oil prices. In the medium term, OPEC+ adhering to the April production increase, coupled with the uncertainty of tariff policies, has put overall pressure on the oil market. As oil prices gradually stabilize at the bottom, PX prices have also followed the raw material to stop falling. From the perspective of PX fundamentals, the market has recently started to pay attention to the positive impact brought by regular maintenance in the second quarter. It is understood that the maintenance is mainly concentrated from April to May. According to the announced maintenance plans, there will be about 6 million tons of facility maintenance domestically. Among them, the 900,000-ton facility of Jiujiang Petrochemical has already begun maintenance; the 2.5 million-ton facility of Zhejiang Petrochemical is scheduled to start maintenance in late March, lasting for 35 to 45 days; the 4 million-ton facility of Shenghong Refining and Chemicals is expected to see a decline in PX operating rates due to the front-end reformer maintenance. In the overseas market, it is estimated that there are still 3.3 million tons of facilities with planned maintenance. Overall, with the increase in domestic and foreign PX maintenance from April to May, and strong expectations of terminal operations resuming, this will significantly improve the supply and demand situation of PX, providing strong support to PTA.

recent month contract basis trend is relatively strong

This week, PTA social inventory is approximately 4.8824 million tons, a decrease of 112,100 tons from the previous week, showing a destocking trend for four consecutive weeks. This week, the restart of Yisheng Hainan's 2.5 million ton PTA plant slightly increased the PTA operating rate to 76.8%. Since March, maintenance plans on the supply side have been gradually implemented. If Yisheng Dalian proceeds with its planned one-month maintenance starting March 15, it is expected that the destocking volume of PTA in March will increase, with an overall destocking amount reaching 300,000 tons. However, the relatively loose market circulation has led to an oversupply of spot goods, which is also the reason why PTA prices have not been effectively boosted despite continuous destocking. Entering April, the scale of plant maintenance will slightly decrease. The 2 million ton Yisheng Hainan plant has postponed its renovation, and since March, PTA processing fees have improved month-on-month, leading to fewer subsequent plant maintenances and an expected increase in supply. As of March 13, the downstream polyester operating rate remains around 91.5%, with room for further improvement in bottle chip operating rates; it is estimated that the overall polyester operating rate in April could rise to 93%. Under these circumstances, PTA faces a dual increase in supply and demand, but can still drive continuous destocking.

In the spot market, the weekly average price of PTA in East China was 4776 yuan/ton, a decrease of 129 yuan/ton from the previous period. Affected by the expectation of concentrated maintenance in March, the PTA spot basis slightly strengthened. In terms of new capacity, the 3 million ton facility of Dushan Energy has been included in the total PTA capacity since January, and the remaining 5.7 million tons of capacity is expected to be put into operation in the third and fourth quarters.

Overall, after April, PTA plant maintenance decreases, but polyester load steadily recovers. According to the supply and demand balance sheet, PTA can still drive continuous inventory reduction in April when facing a situation of dual increase in supply and demand, with the basis of near-month contracts showing a strong trend. It is expected that in the short term, PTA will continue to show a strong fluctuation trend following the cost end.

downstream operating rate steadily recovers

In the polyester field, it is expected that the operating rate in April will steadily increase to around 93%. From a sub-sector perspective, the inventory pressure of short fiber and polyester chip factories has been alleviated, and there is room for further improvement in the subsequent operating rate. As for filament, currently, the texturing and weaving processes lack cash flow and are in a loss-making state, which restrains the improvement of the texturing and weaving machine operation rates as well as the enthusiasm for stockpiling. Subsequently, a strategy of trading price for volume may still need to be adopted.

In terms of exports, due to the impact of additional tariffs imposed by the United States, textile and clothing exports decreased by 4.5% year-on-year in January-February, with new order inquiries being slow and insufficient terminal orders. Overall, after the weakening of oil prices, the processing margin for polyester products still remains at a decent level, and polyester factories do not face significant inventory pressure in the second quarter, leading to a high willingness to operate in the short term. If downstream orders improve during the peak season, it is expected to provide support to PTA futures prices.

In the short term, PTA, supported by cost and a destocking pattern, will mainly experience a low-level fluctuation and rebound. However, due to the marginal recovery of demand but insufficient sustainability, the height of PTA's rebound may be limited.