Weakening Cost Support Keeps PTA Prices Under Pressure

Recently, the US and Iran reached a memorandum of understanding on a truce, agreeing to an immediate ceasefire, the resumption of navigation through the Strait of Hormuz, and the commencement of complete negotiations lasting 60 days. Additionally, on June 22 (regional time), the media committee of the Iranian negotiating delegation released details regarding key points and agreements reached during the first round of US-Iran talks in Geneva. With geopolitical tensions easing, international crude oil prices have come under pressure and retreated, meaning feedstock cost support to PTA will continue to weaken.

Due to waning downstream purchasing interest, nine domestic PTA units—representing a combined annual capacity of 21.45 million tons—have undergone maintenance since April. Data from sector information providers indicate that maintenance plans announced to the second quarter involve a total capacity of 27.3 million tons per year, with an estimated reduction in PTA output of approximately 1 million tons.

Widespread unit shutdowns have caused domestic PTA operating rates to drop to historic lows. As of June 18, the operating rate to domestic PTA units stood at 66.39%, down 14.89 percentage points year-on-year. Currently, domestic weekly PTA production has fallen to around 1.28 million tons, resulting in a supply deficit of approximately 55,000 tons per week—though this gap has narrowed compared to might. With the recent rise in PTA prices, the operating conditions of producers have improved significantly; processing margins have rebounded to 665 RMB/ton, and product profits stand at approximately 265 RMB/ton. This recovery in profitability is expected to accelerate the resumption of production at units that had previously undergone maintenance. With supply tightening, the domestic PTA sector has entered a destocking phase. As of June 18, total sector inventory stood at 3.2037 million tons—a week-on-week decrease of 56,500 tons (1.73%)—falling below levels seen during the same period in previous years. Specifically, PTA plant inventory covered 4.52 days of supply (up 0.37 days year-on-year), while polyester vegetation held 10.42 days of PTA feedstock inventory (up 2.82 days year-on-year).

The current destocking cycle was primarily driven by a significant supply gap resulting from concentrated maintenance shutdowns among PTA producers—prompted by tight PX supplies and pressure on processing margins—which pushed operating rates to historic lows. However, market dynamics might shift. On one hand, as the US and Iran move toward peace talks, international energy trade is expected to resume, leading to a gradual recovery in imported PX supplies. On the other hand, the significant rebound in processing margins caused by the current supply shortage is likely to accelerate the restart of previously idled units. Combined, these factors could slow the pace of PTA destocking and gradually alleviate supply tightness.

Regarding the downstream polyester sector, overall sector profitability remains decent; excluding polyester chips and DTY (Drawn Textured Yarn), other items offer profit margins of 200–300 yuan per ton. while the market is currently in the off-season to end-consumer demand, there are signs of a recent pickup in orders. As of June 18, the average operating rate of the domestic polyester sector was 80.19%—down 8.44 percentage points year-on-year—corresponding to a weekly PTA demand of approximately 1.34 million tonnes. Meanwhile, the operating rate in the weaving sector stood at 57%, a year-on-year decline of 13 percentage points.

Weakened purchasing interest at the end-consumer level has caused inventories of polyester filament yarn to continue rising. As of June 18, inventory levels to POY, DTY, and FDY stood at 26.5 days, 38.3 days, and 30.7 days, respectively—representing year-on-year increases of 10.2, 12.7, and 10.9 days, or development rates of 62.58%, 49.61%, and 55.05%.

Overall, domestic operating rates are currently at historical lows, and the PTA market has demonstrated some resilience against price declines in the short term. However, it is crucial to consider that the underlying overcapacity issue remains unresolved; furthermore, as processing margins recover to high levels, expectations are rising to the restart of production units that had previously undergone maintenance. Consequently, the immediate supply deficit is unlikely to offset the pressure of a medium-to-prolonged supply recovery, making a downward shift in PTA price levels highly probable.