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Insight | Time:Nov 10 2017 2:43PM
PTA-PX spread to keep dipping
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Naphtha market has kept bullish, leading to a squeeze of PX margins. Under cost pressure, PX prices maintained firm. Higher costs on one hand supported PTA prices, however, on the other hand, suppressed PTA-PX spread.

Judging by current situation, PTA production increment of November shall be limited. Reignwood has commissioned the 1.4 million mt/yr PTA unit on Oct 17 and one 700kta line out of the 1.4 million has achieved on-spec products on Nov 1. Xianglu restarts 3 million out of the 4.5 million PTA unit on Nov 10 for trial run. Jiaxing PC may start up the 2.2 million new unit in the latter half of November. Meanwhile, a few units (Tianjin PC, OPSC and Pengwei) shut for turnaround. Therefore, PTA inventory may continue dipping, down by about 40-60 KT and the turning point of PTA supply and demand pattern may arrive later in December.

PTA prices were supported by healthy fundamentals at present, but PTA-PX spread will surely decrease and the downtrend may last for a while. PTA-PX spread based on spot prices has decreased from the peak of above 1000yuan/mt in the middle of July to below 600yuan/mt at present. PTA market may slowly soften before oversupply emerges and downstream demand weakens substantially. After Xianglu and Jiaxing units start commercial run, PTA-PX spread may narrow to 350-450yuan/mt.
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