The recent sentiment in the commodity market is not very good. The main reason is that the increase in domestic sporadic cases has made the liquidity during the Spring Festival much worse than originally expected (not to mention the situation of foreign epidemics, some European countries already had It was announced that changes to some restrictions would not be implemented until mid-February at the earliest). The PTA futures market has been falling at a steady pace since last week. If we look at the fundamentals to find the reason, there are only four words – “profits are exhausted”.
In the early stage, it was like a chicken blood. Under the strong leadership of crude oil, PTA, which traded the concept of “financial squeeze”, in addition to the factor of funds pushing up, was also supported by the demand side to chase the increase. It is also a supporting force for the strengthening of the spot basis. The restocking of downstream weaving and other links has led to the demand for locking raw materials from polyester factories. The benign state transmitted from below is that the inventory of polyester finished products continues to decline at the end of the year.
Figure 1 Polyester weighted inventory comparison from 2015 to 2021 (unit: days)
However, the increase in sporadic cases has caused logistics in some areas of the country to be blocked since last week, and workers in the weaving process went home early, which also caused polyester production and sales to go into a halt starting last week. In previous years, production and sales would be disrupted around 7-10 days before the Spring Festival at least a week in advance. Therefore, due to low inventory and expectations of demand recovery, the situation that polyester maintenance was not intensive this year has also changed this week. Some polyester factories have increased their production reduction efforts, and some companies that did not originally plan to reduce production have made new plans. According to the plan, it is conservatively estimated that the new and reduced production will be around 1.2 million tons.
What is currently more uncertain or controversial is the possibility of resuming work after the holidays. If sporadic cases still spread, measures for returning to work sites after the holidays include quarantine and other policies. , then the post-holiday resumption of work will be delayed by at least 1-2 weeks, which means that the market’s real return to trading activity will have to be delayed until March – or even the second week of March.
From the perspective of PTA’s supply side, last Saturday Baihong’s new device officially produced high-quality products, and the other half of the production line was also ready to start on February 3. Fuhai Chuang’s maintenance The equipment has also been restarted; the new equipment in Honggang is waiting to be put into production next month, and the new equipment of Yisheng New Materials is waiting to be put into production in March. The supply level has begun to enter a channel where negative news needs to be gradually realized.
Based on the balance sheet, PTA’s accumulated warehouse pressure will be very high throughout the first quarter. The increase in social warehouses from January to February will be at least about 600,000 tons. There are still variables in the current resumption of work. If the return to isolation mentioned above occurs, there may be an inventory of about 600,000 tons in February alone.
Figure 2 Monthly supply and demand of PTA from 2018 to February 2021 (unit: 10,000 tons)
Let’s talk about the logic on the cost side. After all, PTA was still being bought for small crude oil two weeks ago. The support on the cost side is undoubtedly the main logic behind the last wave of PTA rises.
Let me talk about the conclusion first – this end will definitely be a strong support in the medium and long term. It will be supported by the price of crude oil after the liquidity is restored, and the support logic of PX fundamentals will be below. ; But from a short-term perspective, the current situation of domestic and global epidemics has put short-term oil prices under pressure (at least there is no substantial benefit to the consumer side before various restrictions are lifted), and after Biden came to power, the market has been waiting and watching. His attitude towards the Iran issue, after all, the lifting of the 3 million barrel ban is an unbearable burden for the crude oil market before the consumer side is officially restored.
Let’s also take a look at the supply and demand of PX. There are two restart news this week – CICC Petrochemical’s two sets of PX units with a total capacity of 1.6 million tons officially restarted on January 26. The entire process has ended its two-month shutdown for maintenance; Fuhua’s 800,000-ton PX unit will also end its one-and-a-half-month maintenance mission and officially restart this week. However, in view of the preparations for the commissioning of three new PTA devices in the first quarter, coupled with the maintenance expectations that still exist to some extent in Asia, the destocking situation of PX since November last year has not been fundamentally reversed, and it will still be large before the end of the second quarter. The probability is that the warehouse will be destocked or in a tight balance state. The launch of new equipment in Zhoushan in March will hardly put great pressure on the market.
Figure 3 Monthly supply and demand of PX from 2018 to February 2021 (unit: 10,000 tons)
Table 1 Known maintenance arrangements for some PX devices in Asia in 2021 (unit: 10,000 tons/year)
So at this stage, we see that the processing fee of PTA continues to be at a low level. It has been basically within 500 yuan/ton since the beginning of the year. In fact, based on the current price of acetic acid around 5,000 yuan/ton, the cost of PTA’s auxiliary materials will be nearly 200 yuan/ton. tons, plus the packaging cost and steam and other link costs of nearly 50 yuan/ton, the current processing fee space of PTA has really reached a marginal state. The supply and demand expectations in the later period are basically a bright card, and it is difficult for PTA to stay in the processing range within 400 yuan/ton.A very long time.
Figure 4 Year-on-year comparison of PTA spot processing fees from 2016 to 2021 (unit: yuan/ton)
So generally speaking, PTA is still in a state of range oscillation. It is temporarily due to entering the transition period of “exhausting all profits” → “cashing out negatives”, plus the Spring Festival The factors of accumulation of inventory and the uncertainty of resumption of work after the holiday exist, and the overall situation is weak and volatile; but in the medium and long term, the lower space is subject to cost support, and the lower range of processing fee margin still has to rely on crude oil to open up, but for the time being, there is no macro In terms of political risks, crude oil is also extremely resilient.
Let’s pay attention to a few points in the future. One is the negative news mentioned above that is waiting to be realized one by one – the situation of resumption of work after the holiday and the start-up progress of the other two sets of new equipment. As well as the global epidemic control situation at the macro level – the first node is the realization of the sentiment of this wave of commodity correction after mid-February against the changes in control measures in the UK, and the second node is the recovery of European and American market demand after March. The situation, in addition, is the issue of overall liquidity. After all, the correction in stocks, bonds and commodities this afternoon is related to the fact that the central bank only launched 2 billion reverse repurchases in the open market, with a net withdrawal of 78 billion. It is also related to the hawkish remarks of a certain Monetary Policy Committee member. , which also requires close attention.
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