PTA encounters double attack



PTA will face greater pressure on accumulated inventory in the first quarter of 2020, and prices will fall under pressure. Based on the price estimate of PX, the processing difference of PTA will be suppressed …

PTA will face greater pressure on accumulated inventory in the first quarter of 2020, and prices will fall under pressure. Based on the price estimate of PX, the processing difference of PTA will be suppressed to less than 400 yuan/ton.

As the polyester equipment has begun to undergo maintenance one after another, and some PTA equipment has completed the maintenance and resumed production, PTA has also returned to the rhythm of downward pressure before November. The current spot price is 4,860 yuan/ton, the main contract is 4,922 yuan/ton, the basis difference is -62 yuan/ton, and the recent processing difference is basically floating around 550 yuan/ton. But this downturn is just the beginning, because in the future, especially around the Spring Festival holiday, PTA will face the double attack of cost depression and overcapacity, and will be under obvious pressure, and may drop to the previous low of 4,400 yuan/ton.

On December 19, the price of PX was US$821/ton, and the cracking spread fell to around US$250/ton. It is expected that PX prices will fall sharply in the first quarter of 2020. In 2019, domestic PX production capacity increased by 11.9 million tons (including Hengyi Brunei project), mainly concentrated in the second half of the year, with an increase of 80%. However, since the fourth quarter, the demand for terminals and polyester has been strong, the overall load of PTA is high, and the pressure on PX production capacity is not obvious.

However, in the first quarter of 2020, with the arrival of the traditional off-season of the Spring Festival downstream, PX will have an obvious oversupply, social inventory may exceed 3 million tons, and PTA processing costs may increase from the current 4,360 yuan/ton. It has dropped to about 4,000 yuan/ton.

Similar to upstream, PTA will also face supply pressure brought about by capacity expansion. According to statistics, a total of nearly 20 million tons of new production capacity will be released in two years from 2019 to 2020. By the first quarter of 2020, the total domestic PTA production capacity will reach 52.58 million tons. If estimated at 80% load, the corresponding apparent output from January to February would be 7 million tons. The current polyester maintenance plan has basically been released. From the end of this month to February 2020, a total of approximately 13.75 million tons of polyester production capacity will be reduced and suspended, accounting for approximately 23% of the total production capacity of 58.5 million tons. From January to February next year, the apparent demand for PTA from polyester is expected to be around 6.4 million tons. Comparing the two, it can be concluded that PTA will face greater accumulation pressure in the first quarter of 2020, and prices are expected to fall under pressure. Based on the price estimate of PX, the processing difference of PTA will be suppressed to less than 400 yuan/ton.

The reason why the operating load is estimated at 80% is not only based on historical data, but more importantly, the devices newly put into production in the past two years have advanced technology and lower costs. If combined with the marginal effect, the processing difference can even drop to around 250 yuan/ton. What’s more, some of the groups to which new production capacity belongs have already connected upstream (such as Hengli, Hengyi, etc.) or downstream (Hengli, Xinfengming, etc.), and can also dilute costs through upstream and downstream. These companies have greater cost advantages and have greater strength and willingness to accelerate competition. Compared with polyester’s full-year production plan of about 4.75 million tons, PTA’s new production capacity of 16.3 million tons on the schedule will keep its main problem in digesting excess production capacity or phasing out old production capacity for a long time.

Of course, we also need to pay attention to the following risk points: 1. Although the Spring Festival holiday is approaching, the current inventory of polyester is low. Whether production reduction and shutdown will be postponed in order to stock up, we still need to pay close attention. 2. There are still two issues with the new PTA production capacity in the first quarter that require further observation: first, whether it can be put into production as scheduled, and second, whether the load can quickly reach a high level after being put into production. 3. Whether OPEC+ will continue to deepen production cuts, thereby raising crude oil prices and providing support to PX and PTA.

For PTA, the main theme in 2020 will be low processing differences and production capacity changes. After the Spring Festival, PX is expected to fall back to the 750 level. In addition, PTA profits will further decline. The processing difference of around 600 yuan/ton may become the “ceiling” of the processing difference of PTA companies for a long time to come. Facing a new round of magnificent production capacity expansion, perhaps using PTA futures and options to lock in profits and hedge risks in advance is the best and most convenient “ferry” for enterprises and traders to overcome difficulties. </p

This article is from the Internet, does not represent Composite Fabric,bonded Fabric,Lamination Fabric position, reproduced please specify the source.https://www.tradetextile.com/archives/39353

Author: clsrich

 
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