PTA

Part A: Review (2018/12/3-2018/12/7)

From December 3, 2018 to December 7, 2018:the closing price of the main contract (TA905 contract) of PTA futures on Friday was 6292 yuan, 446 yuan higher than the closing price of the last trading day of last week. The highest price for this week is 6328 yuan, and the lowest point is 5720 yuan.

This week (2018/12/3-2018/12/7), the total volume of the main contract was 8,992,380 lots, a decrease of 4,826,320 lots from last week. After the close of trading this Friday, the open interest of the main contract was 989,194 lots, a decrease of 236,372 lots from the last trading day of last week.

11,772,418 lots of China PTA futures were traded during 12/3/2018 to 12/7/2018, and the weekly turnover (notional value) was 359,998 million yuan (RMB), approximately $52.43 billion. The average daily trading volume for the current week was 2,354,484 lots/day.

Notes: The main contract refers to the futures contract with the maximum open interest. Table:Volume, Open interest and Turnover of PTA futures.

Notes: The last trading day for China PTA futures December 2018 contract (TA812) is December 14th, 2018 and the final delivery date is December 18th, 2018.

Part B: Market Dynamics

1. China's unique futures variety goes to the world

China is the largest producer and consumer of PTA. At present, PTA's upstream product PX is mainly from Japan and Korea, and domestic PTA production is relatively concentrated in the eastern coastal areas，enterprises are highly recognized and highly engaged in the futures market mechanism. It can be said that the opening of PTA futures to foreign investors is based on a very mature domestic spot market. In 2017, the functional level of PTA futures ranked fourth among 25 industrial futures and ranked first among chemical futures. However, in terms of upstream PX import pricing and downstream polyester product export pricing, China’s pricing influence needs to be improved.

For this reason, the internationalization of PTA futures is very necessary. Among futures varieties that China has allowed foreign investors to participate in, crude oil futures and iron ore futures are the forerunners. PTA futures is China's unique futures variety and is currently the only polyester futures product in the world. The introduction of PTA futures into overseas traders provides the world with an efficient PTA futures trading platform, which will increase the pricing influence of PTA futures globally and promote the Zhengzhou Commodity Exchange to become the global pricing center for polyester products.

Zhu Hao, director of the Information Department of the China Petroleum and Chemical Industry Federation, said that the introduction of PTA futures into overseas traders will help optimize the structure of PTA futures market participants, form a more representative pricing benchmark, and increase the recognition of PTA futures prices by overseas companies. Furthermore，it will increase the pricing influence of PTA futures globally and promote the growth of international trade in PTA and polyester products.

“Just focusing on production is the biggest risk. PTA introduces foreign investors, and our domestic enterprises must thoroughly study the relevant rules and try our best to hedge against the unpredictable market conditions.” Liu Dewei, general manager of Fujian Jinlun High Fiber Co., Ltd. Said.

Yisheng Petrochemical is the world's largest PTA spot production enterprise, with an annual production capacity accounting for 28% of China's total PTA production capacity. The relevant person in charge said in an interview that Yisheng Petrochemical has basically completed the scale development of polyester and PTA, and has begun to extend to the upstream refining and chemical project, and is committed to becoming a company with full industrial chain and anti-cyclical risk capability.

Foreign markets have a very high demand for participating in PTA futures. On the morning of November 30, after becoming the first overseas trader to participate in China's crude oil and iron ore futures trading, Glencore also won the first transaction of an offshore trader to participate in the PTA1909 contract. On the same day, the company commissioned Xinhu Futures Co., Ltd. through Shirui Financial Services Co., Ltd. to conduct the transaction. In addition, Italian GSI companies, American Koch Industries, BP and other overseas companies have expressed their willingness to participate. Mercuria is a global energy and commodities trading company, the relevant person in charge of the company said in an interview that Mercuria has set up a branch in China and is the first overseas participant in crude oil and iron ore futures. PTA futures have good market liquidity and with the largest volume and open interest among chemical futures in China, the market functions well and they will continue to actively participate.

Delivery system is different

The international trade volume of upstream and downstream products of PTA is relatively large, and the major trading countries are distributed on the “Belt and Road”. In 2017, China imported PX 14.43 million tons, with an import dependence of 59%; China's polyester products exported 5.47 million tons, accounting for 15% of domestic production. The import and export trade objects of PTA's upstream and downstream products are highly compatible with the countries involved in the “Belt and Road”. For example, downstream polyester filaments are exported to Turkey, Egypt, and Vietnam; downstream bottles are exported to the Philippines, Indonesia, India, South Africa, and Ukraine. Therefore, the internationalization of PTA futures will promote the circulation of RMB on the “Belt and Road” and be in line with the internationalization of the RMB.

Previously, the internationalization of crude oil futures and iron ore futures went smoothly, providing a well-equipped policy environment. The internationalization of PTA futures continues to innovate on the basis of the first two specific varieties, and its highlights include: In terms of appropriateness, PTA futures have adopted mutual recognition of appropriateness. Traders who have trading rights or transaction codes for specific varieties of other domestic futures exchange, and traders who will open accounts for the second time may be exempted from the requirements of knowledge testing, applicable funds, and trading experience. In addition, professional investors who meet the requirements of the “Administrative Measures for the Appropriateness of Securities and Futures Investors” may also be exempted. Guo Shuhua, director of the Non- Agricultural Products Department of Zhengzhou Commodity Exchange, said that this is to provide convenient access for domestic and foreign customers. At present, 78 overseas customers have successfully opened accounts.

In terms of the delivery system, the introduction of PTA futures to foreign traders is different from crude oil and iron ore futures. Crude oil futures are net price transactions, all warehouse receipts are bonded warehouse receipts. When delivery is matched, there is no situation where overseas buyers are assigned to duty-paid warehouse receipts. Iron ore futures will ensure that foreign traders can receive bonded warehouse receipts by introducing warehouse receipt service providers to provide warehouse order exchange services. PTA Futures introduces the export service provider system to provide agency services for exporting goods to overseas buyers who are willing to participate in the delivery of goods. And add the clause " when PTA futures contracts are matched for delivery on the last trading day, the registered bonded receipts of PTA used for delivery shall be allocated to overseas buyers preferentially.", where the positions for delivery held by the overseas buyers are greater than the number of registered bonded receipts, the registered bonded receipts shall be allocated to the overseas buyers holding positions for a longer time in priority to as far as possible to meet the needs of enterprises with real hedging needs. Relevant persons from the Zhengzhou Commodity Exchange also said that more futures such as methanol will enter the international arena in the future.

Copyright by fangquant.com