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PTA in 2019:capacity growth speeds up

In 2019, PTA capacity growth speeded up. With Sichuan Nengtou's 1 million tons/year and Xinfengming's 2.2 million tons/year PTA units into operation, the total PTA production capacity reached 48.98 million tons/year, a growth rate of 7%. In 2019, the PTA market performed well, but under the pressure of more supply, the inflection point of PTA prices and processing margin has arrived. Now, let's have a brief review of PTA market in 2019. 

Price 
In 2019, PTA prices dropped from 6,000yuan/mt at the beginning of the year to around 4,900yuan/mt at the end of the year, a decrease of 18.3%. In the first half of the year, with the economic recovery and plant maintenances, PTA prices rose from around 6,000yuan/mt in early Jan to 6,800yuan/mt in Apr; the market in May-June showed a V-shaped trend. PTA market fell briefly in May as of the restart of the some units and weakened demand. In June, PTA prices surged to 6,800yuan/mt with the release of good news from Sino-US trade talks and procurement of downstream plants. However, PTA prices fell slowly to 5,000yuan/mt from July due to poor terminal demand and supply expansion expectations. 

 

 

 

Processing margin  

In 2019, the PTA processing margin continued to rise, with an average annual processing margin of about 1,020yuan/mt, which is about 9% higher than 936yuan/mt in 2018. From Jan to Mar, the PTA-PX processing spread was at 650-880yuan/mt, and then increased to around 1,400-1,800yuan/mt. From Aug, the processing spread was rapidly compressed, from 1,000yuan/mt at the beginning of Aug to around 300yuan/mt in Dec.  

   

  

Remarks: PTA-PX processing spread is calculated at 0.656 * PX * 1.02 * 1.16 * exchange rate. (After April 1st, VAT was reduced from 16% to 13%)  

 

Output  

In 2019, the PTA plant operating rate remained at a high level. The monthly operating rate was above 90%. The average annual operating rate (based on the monthly average) was 95%. It is estimated that the cumulative annual output will be around 44.7 million tons, an increase of about 9%. Especially after Sept, due to the high PTA-PX processing spread, PTA suppliers kept operating rate high and some units were running over 100%. The maintenance plans of some units were postponed.  

   

  

 

Inventory  

Due to high profits, PTA supply has increased significantly and the inventory continued to rise (expected to be around 700,000 tons), a historical median level. However, due to the increase in polyester demand, from the perspective of inventory consumption ratio, inventory of 12-13 days is still in a neutral low level. From the perspective of market performance, the PTA spot market gradually transitioned from tight to loose in December.  

 

  

 

Imports and exports  

According to Customs statistics, from January to November 2019, domestic PTA (including QTA) imports were around 979,000 tons, exports were around 631,000 tons, and net exports were around 350,000 tons, an increase from last year. The main reason is that due to the obvious price advantage in oversea PTA market from April to July, a large number of USD cargos inflowed into the domestic market, and the import volume in July was as high as 140,000 tons. The export market is relatively stable, and the monthly export volume has basically maintained at the range of 40,000 to 60,000 tons.  

 

  

 

In general, PTA industry performance is tolerable in 2019, both in terms of operating rates and processing margin, staying above the historical average level. However, with the start of new capacities since the fourth quarter, the PTA-PX processing spread have been significantly compressed. In 2020, new PTA units will continue to be put into operation and the capacity growth rate is expected to reach about 20%. Compared with the 9% capacity growth rate of polyester, PTA market is facing greater pressure from supply surplus.  

 

The related data, analysis and forecast are available in the 2019 polyester industrial chain annual report and 2020 outlook report. 

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