With the continuous development of the PTA industry chain in recent years, the upstream and downstream processing profits of the industry have undergone major changes with the changes in supply and demand of PX, PTA, and polyester. . PTA has gradually transitioned from supply exceeding demand and processing profits being relatively generous to oversupply and processing profits being compressed. Towards the end of 2020, PTA has put in a total of 8.4 million tons of production capacity. As of early December, the average processing fee of PTA this year was 620 yuan. In terms of this difficult 2020, PTA’s final processing fee performance has been excellent.
A brief summary of memories:
The brief summary of memories of PTA in 2020 can be described in four words: first suppress and then raise. To put it briefly and comprehensively, the PTA market in the first half of the year was stimulated by multiple negative factors such as the epidemic, costs, demand, and sentiment. Everyone witnessed the negative value of crude oil and then witnessed PTA falling to historical lows. The spot price hit a low of 2,960 yuan/ton. After crude oil climbed to US$50 in the second half of the year, due to the impact of costs and funds, PTA spot prices rose to the current level of 3,580 yuan/ton. Then the editor will give you a look at the next few changes in PTA from the aspects of cost, processing difference, and inventory:
Predict the later stage:
Strong upward expectations on the cost side
Changes in PX processing difference from 2019 to 2020
Source: Longzhong Information
When it comes to the cost of PTA, we still judge it based on the poor processing of crude oil, PX and PTA itself. Recently, Europe and the United States Many countries have begun to receive the first batch of vaccines. The Federal Reserve is likely to strengthen its easing policy, the US dollar has fallen, and international oil prices have continued to rise to around US$50. The rise in oil prices has undoubtedly increased PTA’s valuation. And the rise in crude oil may promote recovery in PX prices. The processing margin of PX is generally low in 2020, falling from US$280 in 2019 to around US$150. Domestic production capacity of PX has increased rapidly in recent years, and Zhejiang Petrochemical and Dongying Weilian Petrochemical have launched PX production capacity. In addition, because Japan and South Korea maintain long-term contracts, their load reduction and maintenance efforts are relatively low. The overall PX operating load remains at a relatively high level, and PX inventory continues to increase. However, as crude oil expectations improve, PX processing fees are expected to recover to a level of upwards of US$180 in 2021. According to our understanding, the contracts of Japanese and Korean companies in 2021 are close to 70%, and the domestic Sinochem Quanzhou will be launched at the end of the year, and the production capacity of Zhejiang Petrochemical is expected to continue to be released in 2021. PTA’s production in 2021 is expected to be 13.2 million tons. The increase in demand is much greater than the supply side. Therefore, the upward momentum of PX’s processing difference is expected to be obvious.
Processing fees may be narrowed
Trends of PTA processing fees in 2019-2020
Source: Longzhong Information
The intensity of PTA production from the end of 2019 to 2020 reached the highest level in the past 10 years, with high The intensity of production is squeezing the profits of PTA links. However, this year’s PTA operating rate has remained at a high level, and the processing fee is not as weak as expected. This is significantly different from the market’s consensus expectation that the large refining and chemical industry chain will be put into production in 2019-2020, which means a loss logic. This year’s PTA processing fee averages 620 yuan. Nearby, the rise in costs in the third and fourth quarters has compressed PTA’s processing fees to a certain extent. With rising costs and the release of supply and demand capacity, PTA’s processing fees are expected to narrow to a certain extent. However, considering the poor control of processing by large enterprises and the high processing fees of old production capacity. It is expected that PTA’s processing fee will be within a reasonable range.
High inventory levels become the norm
PTA social inventory from 2016 to 2020
Source: Longzhong Information
As of early December 2020, the average social inventory of PTA was 3.8 million tons. A year-on-year increase of 184%. In 2020, PTA put into operation a total of 8.4 million tons of new production capacity. A total of 5.33 million tons of polyester were put into production. The increase on the demand side is far less than the production intensity on the supply side. Including 2021, PTA’s new production capacity will be 13.2 million tons, and polyester’s new production capacity is expected to be 5.58 million tons. For both enterprises and producers, high PTA inventory will gradually become the norm. PTA social inventory will continue to accumulate. It is expected to reach a high of 5.5 million tons by the end of the year.
Finally, let’s briefly mention the demand side. With the easing of the epidemic and the increase in consumer demand in foreign and domestic textile markets in 2021, the polyester segment is expected to maintain high and low loads in 2021. in stock. The polyester segment is expected to benefit from the squeeze on profits in the PTA segment brought about by the large-scale production of PTA in 2021, with profits shifting from the PTA segment to the polyester segment. For PTA, it is not appropriate for PTA to be overly bearish on the recovery of the demand side and the expected judgment on the cost side. We also look forward to PTA once again standing out amid the pressure.
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