Since the beginning of Dec, 2016, PTA prices have increased more than 3% on the back of low inventory, good buying and rising crude oil, though lately PTA has dropped properly. In 2016, commodities are mostly hot. Compared with coal, PP and methanol etc., PTA is relatively weaker. But in 2017, PTA market is likely to increase.
Firstly, crude oil cost is expected to keep firm since OPEC reached an agreement in freezing output.
According to the estimations of crude oil prices from major investment banks, crude oil prices are estimated to range between $50-66/bbl in 2017, far higher than $30-50/bbl in 2016.
According to U.S. Energy Information Administration (EIA)'s Dec report, in 2017, crude oil supply surplus is expected to narrow from 2016 and it is likely to see balanced supply and demand in the third quarter. International Energy Agency (IEA) estimates that crude oil supply would be short in the first half of 2017 if output freezing is smooth. Nevertheless, crude oil prices are likely to be higher.
Secondly, unexpectedly heavier PX turnarounds and continuous room for devaluing RMB may push up PTA cost further.
No.2 aromatics unit: T/A for 45-60 days in Jun-Jul 2017
T/A for 45 days from Mar 20th, 2017
Debottleneck in May-Jun 2017
3-week T/A in Mar-Apr 2017
No.1 unit T/A plan in Mar-Apr 2017
T/A for 45 days from end-Apr, 2017
T/A plan in Apr-May 2017
T/A plan in May-July 2017
excluding small units
In the second quarter of 2017, about 6,870kt capacities of PTX units are expected to be involved in turnarounds, far more than 4,380kt in 2015 and 4,520kt in 2016. This may further push up PTA prices.
Besides, there are 3 expectations for FED raising interest rate in 2017, and RMB remains under heavy pressure from devaluing. PX, of which import dependence is as high as about 55%, is to suffer rising cost.
As the chart shows, PX price and RMB exchange rate share similar trends. In 2017, Goldman Sachs estimates that the exchange rate of RMB against USD would devalue from 7 in the first quarter to 7.3 in the last quarter.
Thirdly, the ratio of top 20 long positions to short positions in PTA futures for 1705 delivery improves. Commodity market and stocks market may continue to attract capital from bond market and real estate market.
The ratio of top 20 long positions to short positions in PTA futures is improving slowly. Although the whole volume of long positions is smaller than that of short positions, long positions are increasing. Besides, some major PTA plants are likely to close some units for turnarounds, which is probably to push up PTA prices as well.
In China, not considering financial products, investment capital mainly flows into real estate market, bond market, stocks market and commodity market.
On Dec 16th, 2016, the Central Economic Working Conference ended. According to the conference communique, policy about real estate market is to tighten in 2017, which may squeeze some capital out of the market. In bond market, there is large uncertainty after Sealand Securities broke out a scandal. Besides, given higher expectation for inflation in the first half of 2017, monetary policy is likely to tighten, which is negative for bond market as well.
Therefore, the capital is likely to flow out of real estate market and bond market to commodity market and stocks market.
Above all, attributed to expectation for strong crude oil, devaluing RMB and intensive turnarounds of PX, PTA market is likely to increase in the first half of 2017. But polyester demand and PTA plant operation should be concerned about as well.