PX Supply Shifts from Tension to Balance on Poor End Demand
The PX market is projected to remain in a tight supply in the second quarter of 2022, and the forward-month futures prices have been higher than the front-month futures prices. However, the downstream end demand is weakening, and this will impact the upstream PTA market. Accordingly, there are increasing PTA enterprises stopping or cutting production, which will slash the demand for PX. Therefore, the PX price uptick will be restrained.
PX demand weakens on unit turnarounds in polyester and PTA industries.
The maintenance in the PTA market has come to an end in March. However, the terminal textile market will usher in operating load cut or unit shutdown, which will further weaken the end demand for PX. It was heard that there are increasing production cut and unit maintenance plans at polyester plants, and this news put production pressure on the upstream PTA industry. In recent days, the PTA enterprises had announced maintenance capacity of more than 5 million mt/a. It could be seen that the supply of PTA is gradually changing from loose to tight.
From the chart above we can see that the planned maintenance capacity of polyester industry is still increasing. Moreover, affected by the polyester industry maintenance, the accumulative maintenance capacity of PTA in April exceeded that in March, showing that China’s domestic PX demand was on a downward trend. Although the PX unit maintenance in Asia was relatively concentrated, compared with the sharp decline in demand, the supply cut had little impact on the PX market.
The production and sales were poor, and the inventory of the industry chain was high.
The overall inventory of PX and PTA markets was on a downward trend, which was mainly due to intensive unit maintenance. By comparing the inventory levels of polyester feedstock and polyester products, it can be seen that the inventory days of polyester products are increasing month by month, and this is due to the poor transactions in the terminal textile industry. The production and sales pressure on the PET market is reflected in the operating rate of PET enterprises, and then the PET-side pressure will be transmitted to upstream PTA and PX market operating rates.
2022 Jan-Apr Polyester Products Inventory Days Comparison
From another point of view, if the inventory at the polyester end does not fall significantly, the demand for PX and PTA, the feedstock of PX, will continue to be depressed. Therefore, it is difficult to realize the decline in feedstock inventory and tight PX supply expected by the market, and the PX price increase will also be difficult.
Overall, from the second half of April and the first half of May, the operating rate of the end market will be a key factor affecting the PX, PTA as well as the polyester industries. It is projected that the downstream demand will gradually improve in the second half of May, and then the inventory in the industrial chain will be digested faster.
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