PTA spot basis saw a notable increase last week, driven by several unplanned maintenance and production cuts at PTA plants, which accelerated the destocking of PTA spot supplies. In mid-August, three PTA units in Shandong and Jiangsu, with a total capacity of 7.4 million tons, are scheduled to restart. This may lead to a brief spike in the PTA spot basis, but sustained upward momentum is lacking.

Unplanned PTA Plant Maintenance and Production Cuts

Last week, the PTA spot basis rose significantly due to unplanned maintenance and production cuts. The spot basis surged, with some PTA spot suppliers quoting a basis of 240 yuan per ton above the futures contract 2609. By Friday, a single bid for Zhangjiagang spot rose to 270 yuan per ton above the futures contract 2609. The increase in the PTA spot basis was primarily due to the daily operating rate of PTA capacity hitting a decade low. With limited spot supply and reduced offers, buyers were forced to follow the price increase. Several unplanned maintenance and production cuts, combined with a planned technical revamp shutdown of a 3.75 million-ton PTA unit, pushed the daily operating rate below 49%, a new low in ten years. With a typhoon approaching, market participants are concerned about further declines in the operating loads of some PTA plants in Jiangsu and Zhejiang, accelerating PTA spot destocking.

Outlook: Typhoon Landfall May Drive Brief Basis Spike

Supportive Factors: The PTA capacity operating rate is at a decade low, and the typhoon making landfall in Zhejiang may keep some PTA plants in a reduced production state. As Typhoon "Bai-lu" nears, coastal areas of Shanghai, Jiangsu, Zhejiang, and Fujian have fully activated emergency response measures, with major port clusters in East China implementing port closures, voyage suspensions, and operational halts, directly impacting PX logistics. On one hand, a major PTA supplier's shipments are slow; on the other hand, the market is concerned about disruptions to PX shipping. However, two PX units in East China have just restarted, and their successful output may help maintain current production at some Ningbo-based PTA plants, preventing the PTA operating rate from hitting a new decade low. In the short term, the polyester operating rate fluctuates around 77%, while the PTA operating rate remains below 49%. This accelerates PTA destocking, turning the spot market into a sellers' market, with the potential for a brief basis spike.

Negative Factors: Excluding the typhoon, the restart of planned PX and PTA units will increase, weighing on the PTA spot basis. Three PX units in Zhejiang and Shandong, with a total capacity of 4.6 million tons, are restarting, which could significantly boost domestic PX supply. A 2.5 million-ton PTA unit in Shandong is set to restart on August 10, a 2.5 million-ton PTA unit in Jiangsu plans to restart around August 15, and a 2.4 million-ton PTA unit in Jiangsu is scheduled to restart in mid-August. Additionally, PTA units that had unplanned production cuts due to the typhoon will ramp up after the storm passes, increasing PTA supply. Downstream demand is weak, with the polyester operating rate significantly lower than last year, dampening PTA demand. As of August 7, the polyester operating rate was about 10 percentage points lower than last year, with no major polyester plants planning to restart or increase loads in the near term. Some polyester factories may cut production due to insufficient PTA supply.

Impact: Spot market trading sentiment has weakened, and spot processing fees have risen. The increase in spot basis has reduced buying and selling activity in the spot market. With limited spot supply, traders have reduced offers, with some having no inventory to sell and entering a wait-and-see mode. However, the rapid rise in basis and buyers' concerns about a potential sharp drop have limited their willingness to follow price increases, with only those in urgent need of supplies paying higher basis. Low spot supply benefits PTA spot processing fees, which are expected to continue rising, aiding PTA companies in hedging. In summary, the typhoon is disrupting PX and PTA logistics, with limited PTA spot supply accelerating destocking. The PTA spot basis is expected to rise briefly, possibly reaching a premium of 270-280 yuan per ton over the futures contract TA2609. However, as the typhoon passes and PX and PTA units gradually restart, the PTA spot basis lacks sustained upward momentum.