In this year’s PTA expansion cycle, the emergence, outbreak and mitigation of the COVID-19 epidemic can be said to have provided periodic operating opportunities for the weak market. The panic in the market from January to April and the drag on the demand side caused by the epidemic intensified the contradiction between supply and demand in the PTA market, with all links reaching historically low levels. As the domestic epidemic eased, the downstream construction load gradually increased, coupled with some funds’ bargain hunting behavior. Boosted by the epidemic, futures prices rebounded slightly at the end of April. However, textile terminals that rely on exports still performed sluggishly under the fermentation of foreign epidemics. The main PTA futures prices from May to August continued to fluctuate in the range of 3600-3900. The weakness of the PX market coupled with the strong price of downstream polyester has made the PTA link the most profitable link in the entire industry chain. The average spot processing fee during the year can reach around 650 yuan. It is precisely in this high-profit situation that the scenario of centralized maintenance in the second quarter no longer exists. More manufacturers choose to insist on production and postpone maintenance to occupy market profit shares. Maintenance in August and September is also at a discount than planned.
Since then, the number of devices undergoing maintenance has increased in the fourth quarter. However, it is worth noting that in the fourth quarter, in addition to the new production capacity contribution of the Xinfengming device in early October, there were also New production capacity is expected to be put into production, and the increase in these new production capacities is enough to offset the loss of original equipment maintenance. Even if there is a timing mismatch, the actual production capacity will be put into production at the end of the fourth quarter and the market will be brought back to reality. It can be said that in recent months, due to the gradual release of maintenance capacity plans, the pressure of continued increase in inventory has been alleviated. However, the commissioning of integrated devices will gradually realize supply in the later period, so the high inventory situation in the market will be difficult to effectively alleviate. There is a question mark as to whether the polyester and even the downstream weaving market can maintain the current preferred operating load after the Golden Nine and Silver Ten. The contradiction between PTA supply and demand will intensify with the release of new production capacity. In the context of not being optimistic about future processing fees, PTA The probability that manufacturers will continue to delay maintenance increases, and the fourth quarter may be a period when the PTA market shifts from a periodic balance to a comprehensive surplus.
1. The weakness of PX is difficult to change, or the processing fee may slightly improve due to the increase in downstream production
Last year, PX’s production capacity growth rate of 57% contributed huge supply to the market. However, because Hengyi Brunei and Zhejiang Petrochemical were released in the fourth quarter of last year, the actual growth rate of annual output was about 31%. In January this year, Zhejiang Petrochemical’s second phase of 2 million tons was put into production, and Fuhai Group has also recently produced qualified products. From January to August, domestic production of PX increased by 47.2% compared with the same period last year, while import dependence also dropped to 39.3%, a decrease of 9.4% compared with the same period last year.
From the PX supply and demand table, PX accumulation is mainly concentrated in the first quarter , the inventory has increased slightly in the past three months, with an average monthly accumulation of 200,000 tons. In September, Fuhai PX has been able to produce normally. Before the release of the Xinfengming PTA device, in fact, the rhythm of PX accumulation is still difficult to change. This is also an important reason for the weak PX.
Compared with the decline and rebound of oil prices in the first half of the year, PX’s own supply and demand side was weak. The decline in oil prices accelerated the decline of PX, while the rebound in oil prices provided support to the market. The intensity is limited. After international oil prices hit a historic low in late April, PX prices also halved from the beginning of the year. However, with the strong rebound in oil prices in recent months, PX has appeared weak. The price difference between PX and naphtha has reached a low of around US$130/ton. Based on this processing fee, almost all PX manufacturers are losing money. In the past two months, the PX-naphtha price difference has almost been fluctuating around $150.
Refining and chemical integration has brought huge changes to the market in the past two years. We found that in 2019 Since then, the operating rate of domestic PX equipment has basically been in the range of around 80%, which has been greatly improved compared with the previous single-system era. Even in the current situation of production losses, PX has maintained a good operating rate. First of all, we know that almost all PX products are used in the production of PTA, and 90% of them are contract goods during the sales process. This determines the importance of maintaining stable production and operations for manufacturers to maintain a stable customer source. In addition, in the current domestic PX production, most manufacturers have achieved upstream or downstream supporting production. In addition to PetroChina and Sinopec, the industrial chains of Hengli Petrochemical and Zhejiang Petrochemical, which are representatives of large private refining companies, are more complete. CICC, Fuhai Chuang, etc. are equipped with downstream production, while Fujia Dahua, Qingdao Lidong, Sinochem Hongrun, etc. are all short-process devices, and the overall operation status is poor under low profits or even losses. Among them, Sinochem Hongrun The company has been in production for more than two months in total during the year. Qingdao Lidong’s operating load has been low in the first half of the year, and production has been suspended for more than a month recently.
The increase in domestic supply will also lead to imports of shrinkage. 2020 1-The impact on the terminal market will be difficult to make up for in the short term. As the epidemic situation eases in some foreign areas, foreign trade orders have improved to a certain extent. In the short term, orders may increase due to seasonal factors. However, the overall autumn and winter orders will be far less than the same period last year, and there is insufficient driving force for improvement. It is not advisable to have too high expectations for the peak season.
IV. Outlook for the market outlook
In terms of cost, PX has entered a weak situation since last year and will continue to decline in the future. The addition of new production capacity makes it difficult to change the weak situation of PX. However, the mismatch in the production time of PX and PTA production capacity may improve the low processing fee pattern of PX, and PX processing fees may increase in the fourth quarter. In terms of demand, polyester manufacturers have high expectations for the traditional peak season of Golden September and Silver Ten. However, in fact, the performance of the peak season is unsatisfactory. Although it is better than the off-season of June and July, it is obviously not as good as the same period in previous years. Terminal demand is still under severe pressure, domestic and foreign markets are improving at a slow pace, current inventory consumption is still difficult to guarantee, and gray fabric inventory is still at a high level. The poor production and sales of polyester has caused industry inventories to continue to accumulate. In the situation of general losses in filament yarns, the start-up load and new equipment will be affected to a certain extent, and it will be difficult to further increase demand in the future.
Looking at the PTA market, the expected production in the fourth quarter is approaching. Even though there are still many large devices that have not yet been overhauled this year, with a processing fee level of around 600, manufacturers are focusing on overhauls. The possibilities are limited, and the loss of production capacity caused by maintenance capacity is difficult to offset the newly put into production capacity, and the pressure on the supply side will become more obvious in the future. Even if the launch of new equipment in the fourth quarter is delayed, the supply of PTA will continue to be suppressed. We believe that the fourth quarter may become a turning point for the contradiction between supply and demand to further worsen. PTA is still a short-selling idea on rallies. </p
