China Cotton Textile Association

Last night, the open interest of PTA futures significantly reduced by more than 390,000 lots and closed at 6,224yuan which was 148 points lower than settlement price of the day session. The intraday high and low fluctuations exceeded 6%, which once again caused market concern.

But looking at the whole commodity market in night trading session, the sharp drop in PTA is not unique:

WTI crude oil main contract fell sharply by 4.85% yesterday.
The chemical sector fell by 1.42%.
The Wenhua Commodity Index fell by 0.76%.

From the chart below, PTA Sept futures contract has fluctuated all the way up after hit the lowest point of 5,082 on June 6. As of yesterday's close, PTA futures have risen nearly 27%. In particular, in the past two days, PTA futures have been hit up limit for two consecutive days.

However, last night's plunge does not mean the rise of PTA has ended. Especially from the perspective of PTA market fundamentals, PTA inventory in June slightly increased 20,000 tons and may reduce 150,000 tons in July due to the shutdown of Fuhua. At the same time, the current supply of PTA is slightly limited, and the long position of futures is still relatively concentrated.

In the actual operation, the significant reduction of open interest and the callback of the entire commodity market, still to some extent, brought some hints to the recent market: under the high price, the market volatility may be intensified, the market operation needs to beware of risks.

In particular, when the rapid rise in the previous period cannot continue, the mentality of downstream buyers may change. If the polyester plants is faced with poor sales and rising inventory, will there be any reduction in production ot the sale of raw materials to avoid inventory losses. In addition, the high processing margin of PTA is still a direct driving force for high operating rate of PTA plants. Therefore, there is a certain variable in whether the PTA inventory could reduce 150,000 tons in July.

In short, risks still exist when the price fluctuates drastically.