July 5Th Express: Sluggish Demand &Nbsp; PTA Lacks Driving Force.

2010 has returned to mid year.

The recovery process of the world economy is still uneven.

In 2010, the world economy continued to recover in 2009, but the process of recovery was full of turbulence.

The sovereign debt crisis, the credit shortage of the banking system to the real economy, the high unemployment rate and trade protectionism and other factors make the market worried that the economic recovery process will slow down.

Market expectations for inflation still exist, but it is clearly not as strong as it was at the beginning of the year.

Europe and the United States did not make substantial concessions at the G20 meeting. The spread of the debt crisis has made the euro zone adopt fiscal tightening measures in exchange for confidence in the capital market, and its side effect is to hinder economic recovery and improve the unemployment rate.

The outbreak of the euro zone debt crisis has provided an opportunity for China to restart the RMB exchange rate reform, and also postponed market expectations for new countries to raise interest rates.

But in the face of rising labor costs, speculation in commodity markets and the urgent need to adjust the economic structure, interest rate rises are still hanging on the market like Damour's sword.

The revised US financial regulatory reform plan will be approved by the Senate and the house of Representatives and sent to the president for signature.

Strengthening financial regulation will help to control risks, but regulation will inevitably reduce the leverage of banks, which will inevitably create a negative impact on credit recovery, risk asset prices and bank profitability.

In short, the path of global economic recovery remains uncertain. Hedging demand will continue to support gold and the dollar, plus the tightening policy of China and other emerging powers has started and commodity prices will continue to bear pressure.

Production profit margins remain large.

Crude oil, due to tropical storm concerns and summer peak oil consumption and other factors, will continue to bring seasonal support to oil prices, while the Gulf of Mexico oil spill event will also push up the cost of crude oil production and reduce the daily output of crude oil.

But the US dollar remains strong, and US crude stocks remain high. Worries about slowing economic growth partly offset these factors.

In the three quarter, international oil prices may rebound to $85-95 / barrel, but the possibility of returning to the top 100 dollars in the short and medium term is unlikely.

The seasonal rebound of oil prices will temporarily support the price of naphtha and PX, but it will not have much effect on the price of PTA. The profit per ton of 1000 yuan is the main reason for the interruption of cost conduction.

According to the June 29th PX CFR China / Taiwan LC30-45 day spot price, the production cost of PTA is 5900 yuan / ton, and the PTA price index of the same day is 7100 yuan / ton, and the profit per ton remains above 1000 yuan.

In crude oil to naphtha to PX

The high positive cash flow has made PTA producers active in production. Since April, the operation load of domestic PTA devices has been around 90%.

In the face of the current market situation, the PTA spot business has a very high enthusiasm for setting up insurance, which can be verified by the change of PTA inventory in Zhengshang.

Since late March, the number of PTA warehouse receipts and the total effective forecasts of Zhengshang has remained at more than 30 thousand, compared with the number of warehouse receipts less than 5000 in the same period last year.

High futures inventories and high PTA production enthusiasm make supply pressure difficult to mitigate unless PTA prices fall sharply, prompting PTA factories to jointly Park and repair.

In addition, Jiangyin Cheng Xing Industrial Group Co., Ltd. plans to open a 640 thousand ton / year new PTA device in September, which will impact the spot market.

Weak demand is the biggest reason for PTA to get rid of its current predicament.

From the perspective of seasonality of demand, textile exports and cotton prices, the author is cautious about the demand for PTA in the coming months.

Entering the July, textiles are in the low season of seasonal demand.

Compared to April, the loom operating rate in Jiangsu and Zhejiang has dropped from 80% to 70%.

Although the current polyester product has a good gross profit, the operation rate of the polyester plant remains at 80%, but it is mainly affected by the shutdown of electricity limited news and the strong spot price of cotton, which does not bring much advantage to the PTA.

The slump in demand and the slump in the production of chemical fiber enterprises will reduce the demand for PTA, which is bound to feed upstream. The pressure on PTA factories will continue to increase.

In May, China's textile and clothing export figures were better than market expectations. However, in the face of the euro zone debt crisis, the appreciation of the renminbi, the rising cost of labor, and the competition between Southeast Asian countries, the latter export may slow down.

From the current data, the EU still occupies 20.16% of China's textile and garment export market.

Because the European economic outlook is still uncertain, the European debt crisis has not been completely eliminated. In the second half of this year, the export of textile and clothing to Europe will be likely to slow down. The domestic labor cost is rising obviously. This will force some textile industry orders to turn to emerging markets such as ASEAN and Latin America. The competitive advantage of China's textile industry is gradually decreasing. The RMB exchange rate reform is restarting under the pressure of internal and external pressures, and the textile and clothing export is overshadowed by the appreciation expectation. Although the cross-border RMB trade settlement extends to all countries, all countries will partially offset the expectation that the RMB appreciation is expected to form PTA, but this needs a process.

The impact of cotton price trend on PTA demand can not be ignored.

Affected by the tight supply, the current cotton prices are strong.

In June 30th, the CC index 328 index of China cotton was 18309 yuan / ton, up 1846 yuan / ton compared with May 4th.

The price difference between polyester and cotton has risen from 5913 yuan / ton to the current 8649 yuan / ton. From the perspective of substitution, the advantage of polyester and short is more obvious. This widening price gap has increased the demand for short and short market, thus bringing price support to PTA.

However, concerns about the slowdown in textile and clothing exports and the risk of throwing away cotton and other factors in the country are shaking the foundations of cotton bull market. Cotton market is likely to weaken. This indicates that cotton prices are difficult to continue to form price support for polyester, short and PTA.