PTA’s rapid rise lacks motivation

Last Thursday, the PTA futures market increased volume and positions, and futures prices led the market. However, the good times did not last long. The PTA market atmosphere calmed down last Friday, and the price oscillated back. The author believes that PTA futures prices have a basis for recovery in the fourth quarter, and may slowly oscillate and rebound, but it will not be a short-term rapid rise.
There is a basis for price recovery
It is generally believed that September begins to enter the peak consumption season of the polyester industry chain, and the “Golden Nine and Silver Ten” periods correspond to export orders for Christmas. However, in recent years, due to the transfer of the domestic textile and garment industry to Southeast Asia and the unoptimistic international economic situation, consumption has been sluggish. Textile and clothing consumption has become the norm for “slow peak seasons”, and polyester and textile printing and dyeing companies are not willing to speculatively stock up on goods. Therefore, it is difficult to have a significant boost to the trend of PTA in the fourth quarter.
It is undeniable that the domestic polyester operating rate is currently at a high level, and the load of looms in Jiangsu and Zhejiang is also at a high level. The high-load operation of the device has a rigid demand for raw materials. However, the price of PTA is currently at a historically low level. On the premise that the crude oil and other raw material markets are stable, if the price of PTA drops unexpectedly, it will inevitably trigger a bargain-hunting market. This will limit the space for PTA futures prices to continue to fall, and this situation is expected to remain until the fourth quarter. end.
In addition, from the perspective of cost transmission in the industrial chain, polyester yarn production and sales in Jiangsu and Zhejiang have recently rebounded, the industry has significantly destocked, and corporate processing profits have also rebounded, which means that the ability to withstand rising raw material prices has increased, which is conducive to the transmission of industrial chain costs. The recovery in PTA prices has laid a good foundation.
Overcapacity still exists
Last Thursday, hot money entered the market to boost PTA. The total increase in all contracts during the day reached 700,000 lots. Compared with the previous day’s position of less than 1.7 million lots, the increase in positions reached 41.8%. There are many reasons for speculative funds to enter the market and be long on PTA. First, the prices of chemical products such as PE, PP, and methanol have increased significantly, but the futures price of PTA has been at the bottom; second, PTA is in the peak consumption season, and the cost of the industrial chain Transmission is smooth, and there is a basis for price increases; third, industry equipment is being overhauled in turn, and supply is tightening in stages. However, the PTA index rose only 2.03% last Thursday, and this situation of increasing volume and increasing positions was only short-lived. It can be seen that PTA futures prices cannot be driven up by speculative funds. At present, the main factor restricting the rise in PTA prices is still overcapacity.
Since 2012, the PTA industry has fallen into a situation of low profits or even losses. Companies have sought various ways to survive, and hedging in the futures market has become one of the ways out. Whether they are manufacturers, traders or downstream polyester companies, they can skillfully use PTA futures tools, resulting in hedging, basis trading, warehouse receipt trading, price point, warehouse receipt swap and other transactions closely related to the futures market. model.
However, once the PTA futures price is rapidly raised and the basis spread expands, production companies’ hedging and traders’ arbitrage operations, and even some downstream polyester companies may sell raw materials, the PTA futures price will be under huge selling pressure from industrial funds. Once the price of PTA rises and industry profits improve, companies that have undergone temporary maintenance will actively resume work, and companies that originally stopped production may also revive. The supply of PTA market will increase significantly, and the industry will once again fall into the dilemma of losing money. Therefore, both upstream and downstream companies will face operational uncertainty due to the break in the balance of supply and demand. None of the relevant companies in the polyester industry chain wants to see this situation. At this time, industrial funds choose to operate rationally, scientifically use futures tools, and seize the opportunity. Take advantage of favorable opportunities for hedging, and do not chase the rise and kill the fall. In short, although speculative funds have entered the market to push up PTA, under the premise of overcapacity, PTA prices cannot rise quickly if they want to.
To sum up, under the premise that the current price is low, there is not much room for PTA prices to fall significantly in the fourth quarter. On the contrary, it may pick up due to the support of rigid demand. However, if the raw material market is stable and the situation of overcapacity remains unchanged, PTA futures prices do not have the power to rise rapidly, and a slow oscillation recovery is more likely.