In June, the overall domestic PTA market maintained a downward trend. As of June 29th, the average price of PTA spot market in East China was 5785 yuan/ton, a decrease of 8.36% from the beginning of the month.
In the first half of the year, the geopolitical conflict in the Middle East brought about a risk premium for crude oil, resulting in tight PX supply and strong cost support. At the same time, PTA underwent centralized maintenance and had a low operating rate, leading to tight spot circulation. As a result, PTA prices fluctuated at high levels. Starting from mid month, the geopolitical easing between the United States and Iran, the resumption of navigation in the Strait of Hormuz, the concentrated disappearance of crude oil geopolitical premiums, the sharp decline in oil prices, the collapse of cost support, and the gradual resumption of PTA maintenance facilities have led to a rebound in operating rates and loose supply margins. Coupled with the accumulation of downstream polyester inventory and sluggish weaving orders, PTA prices have plummeted sharply and rapidly declined.
In the short term, PTA on the supply side has zero new production capacity throughout the year, relying solely on operating rate adjustments, and there is no increase in long-term production capacity. Although production resumed after centralized maintenance in the early stage, overall production has not returned to a high level and is currently around 64%. And the port inventory is low, the spot basis is strong, limiting the space for a sharp decline. Entering the early stage of July, the maintenance capacity has been gradually restarted, the operating rate has rebounded, and the supply has shifted from a temporary tightness to a relaxed expectation
On the cost side, there is a lot of maintenance and low inventory in the upstream Asian PX units, and the price difference between PX and naphtha remains high, providing support for the bottom of costs. But after the geopolitical premium of crude oil receded, oil prices returned to supply-demand pricing, price fluctuations increased, and the upward trend lacked strong driving force.
The weak demand will continue to drag down prices, with June and July being the traditional off-season for textiles, and new orders for autumn and winter have not yet been concentrated. The production of weaving machines in Jiangsu and Zhejiang provinces is sluggish, and the inventory of polyester products continues to accumulate. Polyester factories continue to slightly reduce their losses, and the procurement of raw materials for essential needs is weak, resulting in insufficient upward momentum.
Overall, in July, PTA low inventory and PX cost support prevented a deep decline, but downstream demand was weak during the off-season and lacked upward momentum. Attention should be paid to international crude oil fluctuations and downstream polyester production reduction/resumption. It is expected that PTA prices will remain weak and fluctuate in July.
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