PX device failures have occurred recently, as follows:
1. South Korea’s Caltex 400,000-ton device failed near January 9 and restarted on the 21st;
2. South Korea’s SKN 400,000-ton unit failed near the 15th and restarted near the 24th;
3. Hengyi Brunei 150 The 10,000-ton unit was shut down for a week due to a fault near the 23rd, and was put into operation near the 28th; 4. Zhejiang Petrochemical’s 4 million-ton PX unit had a fault, and the load was reduced to 8-8 in the middle of the month. 90% has been running for half a month;
5. CICC’s 1.6 million ton device was originally planned to restart around January 28, but the restart failed and it still takes one month. It will take time to restart;
6. The PX output of a certain manufacturer has slightly decreased;
7. The volume of new equipment is not as expected.
A series of unplanned load reductions have led to continued calls to reduce contracts in the market…
Starting in December, Thanks to the increased output of new equipment and the maintenance of CICC and Fuhai Chuang on the PX side, PX output has decreased, while demand side output has increased significantly. In early January, PX spot flows became tense, while procurement at the end of the month was extremely tight, and spot purchase prices also increased. From a discount of 8-10 US dollars, it is close to Pingshui. At present, it is difficult to reproduce the offer.
It was recently learned that after the ACP negotiations failed for many consecutive months, the February negotiations were unexpectedly reached at US$705/ton. It is understood that ACP (Asian Contract Price) refers to the pricing model in which Japanese and Korean sellers announce the proposed price for next month, the seller makes a counter-offer, and when the final price is consistent, the ACP is announced. It has long been the benchmark price for Asian PX. According to data, the ACP price has only been reached three times since 2019, and there was no record of reaching it from January to October 2020. The re-reaching of ACP this time will undoubtedly inject a shot in the arm into the PTA and polyester markets.
The main reason for reaching the ACP negotiation is that on the one hand, the potential periodic supply and demand mismatch of PX triggers the buyer’s purchase intention, and on the other hand, the buyer wants to use ACP negotiation to solidify PTA cost avoidance risk.
1. Periodic supply and demand mismatch triggers buyer’s purchase intention
In 2020, because the growth rate of domestic PX production capacity far exceeded that of TA and upstream naphtha, the contradiction between PX supply and demand increased, and the inventory accumulated throughout the year. Affected by this, PX processing profits were continuously eroded. Eventually, domestic and foreign manufacturers continued to perform maintenance, and faults other than the superimposed device entered the destocking stage in November. Last week, the restart of Zhongjin Petrochemical’s 1.6 million-ton PX unit was delayed by one month due to device failure. The April maintenance plan of Lidong’s 1 million-ton PX unit was advanced. The commissioning of the second phase of Zhejiang Petrochemical’s 4.5-million-ton PX unit was delayed. PX supply was significantly higher than expected. shrink. During the same period, there are 8.4 million tons of equipment on the demand side that are urgently waiting to be put into production, so PX supply and demand will continue to improve in January. This enhances the buyer’s willingness to purchase.
2. The buyer wants to use ACP negotiations to solidify the cost of PTA
We think ACP gives The price of US$705/ton is already close to the high range in the next few months. Mainly because: crude oil still holds a positive view in the medium and long term, but the short-term market has certain uncertainties due to factors such as tightening liquidity and expectations of a stronger US dollar index; the PX processing gap is roughly similar, and there is an expectation of upward recovery in the general direction. However, judging from the overall revenue balance of the reforming device and the processing range of the new device, the upside space is relatively limited.
If crude oil is valued at around US$60 from February to April and PX is valued at US$200-210, then the more optimistic upper limit of PX can be US$730-740.
If ACP fails to achieve results, PTA production costs need to refer to the spot market price. Taking into account the uncertainty of the cost of crude oil and the prominent supply and demand contradiction of TA itself, the absolute price of PTA is unlikely to continue to rise in the short term, which is contrary to the desire of PTA production companies to repair low PTA processing fees.
After the ACP price is reached, the PTA production cost needs to refer to 50% of the ACP price. On the one hand, the PTA production cost is raised upwards, and the PTA cost is solidified, which is good for PTA; on the other hand, On the one hand, there is room for further growth in PX, and the completion of the ACP will also help with the recovery of processing fees.
We believe that for the PTA market, the conclusion of this ACP negotiation can not only solidify costs through ACP negotiations, avoid upward risks on the cost (crude oil) side, but also reduce risks. to gain a certain profit margin. Affected by this, PTA and polyester prices during the Spring Festival may continue the cost-driven logic, and the supply and demand logic will most likely continue to be ignored. </p