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Insight | Time:Mar 13 2018 2:32PM
Will PTA-PX spread repeat the performance in 2017?
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After 2017 Spring Festival, polyester inventory tended high and profits were compressed. PTA-PX spread started to go downward just after Spring Festival holiday.

Crude oil and naphtha also slid at that time.

After 2018 Spring Festival, polyester inventory was lower than 2017.

Additionally, PFY profit also moved lower.

In terms of inventory and profit, polyester plants would rather reduce inventory than keep profit, which is different from 2017. The mood of polyester plants in 2018 showed weakness.

In 2017, market players kept bearish attitude to demand. However, in fact, the demand turned better than expected in later market, potentially due to low price. The actual demand always increases when price falls. The market will correct it when rising price cannot promote demand. The upward or downward trend of price will not stop in one month if formed.

Currently, PX fundamentals are clear and growth rate of polyester demand is generally admitted to decrease in 2018.

For macro side, more divergences are seen. The conflicts between shale oil and OPEC are obvious recently, reflecting in price trend of Oman/Dubai and WTI crude oil futures. Therefore, fundamentals of crude oil are not good at present.

Naphtha goes unclearly. Price spread of US and Middle East naphtha saw large change, with the former higher than the latter, so US naphtha is not competitive in Asian market.

Polyester price may go similarly in 2018, but it is confirmed that PTA-PX spread will enlarge. PTA does not show weakness compared with polyester, but concerns about the demand exist.
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