In 2020, three new PTA units with a total capacity of 6.2 million tons/year have been put into operation, and Dushan Energy’s 2.2 million tons/year will also be put into operation in the fourth quarter. According to the ICIS supply and demand database, PTA’s effective production capacity growth rate will be as high as 17% this year, and PTA will continue to maintain rapid capacity expansion in the next two years. Such large-scale centralized capacity expansion seems familiar in the history of the PTA industry. However, the core of the previous round of industry expansion was mainly to achieve scale effects and increase industry concentration, while the core of the new round of PTA production is to rely on the simultaneous expansion of refining and chemical integration.
From a time perspective, PTA production capacity There is an overlapping phenomenon at different stages of the cycle, that is, when production capacity expands beyond a critical value, supply shifts from shortage to surplus. As the surplus becomes increasingly serious, market competition forces the clearance of backward production capacity. However, the continuity of capital investment leads to continued capacity expansion. , but the speed of capacity expansion has slowed down significantly. Next, we will summarize the market characteristics at different stages of the production capacity cycle:
In the early stages of the expansion stage (2007-2010), there is a large gap in production capacity, and the industry is in high prosperity During the cycle, the operating rate remains at a high level, corporate production profits are huge, and the basis structure is manifested as futures premium.
In the middle and late stages of expansion (2011-2014), a large number of new devices were put into production, the problem of overcapacity began to appear, the market entered a downturn cycle, the industry’s operating rate declined at an accelerated pace, and corporate profits sharply Compression (manifestly manifested by a deep decline in commodity prices), some high-cost devices suffered losses, and the basis structure turned into a futures discount.
Afterwards, as overcapacity intensified, supply pressure forced price competition, and the industry entered a period of economic downturn. Commodity prices hovered at low levels for a long time, and the industry fell into large-scale losses and high costs. Devices began to withdraw from the market in large numbers (shown as a significant decline in effective production capacity), and the clearance of backward production capacity entered an accelerated stage (2015-2016). The market expected that the supply and demand environment would improve in the future. At this time, the price discovery function of the futures market reflected in advance, and the basis difference The structure returns to futures premium.
Finally, with the improvement of the supply and demand environment, the industry has ushered in an overall recovery, market sentiment has steadily picked up (the operating rate has picked up), and corporate profitability has improved significantly (2017-2018) . When the industry recovery reaches the mid-to-late stage, new supply gaps begin to appear, tight spot supply occurs from time to time, and the basis structure is manifested as futures discount, but at this time a new round of production capacity expansion has already begun (in 2019).
The last round of PTA capacity expansion mainly increased industry concentration and achieved economies of scale
2012 Years ago, after domestic textile demand increased significantly, the PTA industry was highly profitable. During the period from 2011 to 2014, a large number of PTA devices were put into production, which resulted in the industry continuing to suffer from serious oversupply from 2014 to 2017. Production capacity began to be cleared in 2015, and some low-capacity devices and devices from non-leading enterprises were eliminated. The industry scale effect is gradually taking shape, and the market share of leading companies continues to increase.
A new round of PTA production expansion, some units are put into production simultaneously backed by refining and chemical integration
After the production capacity was cleared, industry profits recovered in 2018, so new equipment began to be constructed. Compared with the previous round, in the new round of capacity expansion, device scale has become a necessary condition, and the production capacity of most new PTA devices is more than 2 million tons/year. However, the difference is that in the major PTA units that will be put into operation in the future, upstream refining and chemical integration and downstream polyester production capacity expansion will be carried out simultaneously. Due to past restrictions on crude oil imports by private companies and domestic boycotts of PX, the supply of raw material PX has been restricted by leading polyester companies in the process of opening up the entire industry chain. After the liberalization of crude oil import authority, while the new PTA production capacity was put into operation, the refining and chemical integration projects of leading polyester companies such as Zhejiang Petrochemical, Brunei Hengyi and Hengli Petrochemical, in which Rongsheng Petrochemical and Tongkun Group participated, were all in progress. It was put into operation last year, and the Shenghong Refining and Chemical Project under the Honggang Petrochemical Group will also be put into operation next year. The leading polyester companies will become self-sufficient in their PX resources, and their pricing power in the Asian PX market will also increase.
In the past ten years, the production capacity structure of the PTA industry has also changed dramatically, which is specifically reflected in the oligopoly of the industry and the large-scale equipment culture and industrial chain integration.
From the perspective of industry concentration, the top five production capacity accounted for 65.5% in 2011, and the top five production capacity accounted for 65.2% in July 2020. Although the proportion of C5 production capacity has not changed much, the list of companies on the list has basically changed, and production capacity has gradually concentrated on leading companies. The advantages of leading companies such as Yisheng and Hengli have become increasingly obvious, and the industry has gradually formed an oligopoly competition pattern. Oligopoly enterprises not only have an absolute advantage in production capacity, but also have obvious advantages in production technology, industrial chain supporting facilities and management level.
From the perspective of installation scale, benefiting fromWith the continuous advancement of production technology, the scale of PTA devices is becoming increasingly large. The production capacity of a single set has increased from the initial 600,000 tons to 2.5 million tons, and will even exceed 3 million tons in the future. Behind the significant increase in scale is the significant decrease in device processing fees. According to Zhuochuang statistics, the cost gap between devices with different production capacity is large. The current domestic PTA processing fee is between 350-850 yuan/ton. In the context of a new round of production capacity expansion, PTA processing fees are expected to be reduced to less than 600 yuan/ton in the future, forcing the industry to clear out backward production capacity and realize market-oriented replacement of old and new production capacity.
From the perspective of industry development, the bottleneck in the development of the domestic PTA industry chain in the past was PX, and PX was highly dependent on Japan, South Korea, and Taiwan. Local imports, high import dependence have led to a decline in pricing power in the industrial chain. However, as the approval of refining and chemical projects has been liberalized, PTA private giants have expanded upstream. The successful commissioning of Hengli Refining and Chemical in 2019 marked the acceleration of industry integration development and truly opened up the entire refining-PX-PTA-polyester industry chain. . According to statistics, the production capacity of the top five companies in the industry accounted for less than 60% in 2012 and rose to 75% in 2016.
The current domestic PTA production capacity supporting PX reaches 31.13 million tons, accounting for about 60% of the total production capacity, an increase from last year 11 percentage points, while the PTA production capacity with supporting polyester reaches 39.93 million tons, accounting for about 77% of the total production capacity. That is, the proportion of consumption supporting products is still significantly higher than the proportion of raw material supporting products. However, this status quo will increase as Zhejiang Petrochemical and other projects are put into operation. And gradually change.
In the future, the strongest players in the industry will become stronger, and leading companies will jointly embrace upstream resources
The supply logic of the PTA industry will change in the future. For refining and chemical integrated enterprises, the operating rate of PTA units in the future will not be determined by the profits of the PTA industry alone, but by the profits of the comprehensive industrial chain, which includes both the vertical comprehensive profits of PX-PTA-PET and the integration of refining and chemicals. In the project, the comprehensive profit of other refining and chemical products.
In addition, the compound growth rate of production capacity at each node of the PX-PTA-PET industry chain in the next five years will be higher than 6%, while the growth rate of clothing consumption has declined, leading to a decline in future polyester consumption. The compound growth rate is only below 5%, so the profits of the entire industry chain may remain at a low level. And because of the supplement of comprehensive profits from other products, the start of integrated refining and chemical projects will be relatively stable. For non-integrated enterprises, even stand-alone PTA factories will face greater pressure to survive. After this round of production cycle ends, the industry may see a new round of capacity clearing.
In the future, there will be a significant trend for polyester companies to jointly embrace upstream resources, and the strong alliance will highlight the Matthew effect. The upstream refining and chemical integration project is a capital-intensive industry. At present, Zhejiang Petrochemical’s refining and chemical integration project is jointly funded and constructed by two major polyester companies. It is expected that in the future, there may be more cases of strong alliances and interest bundling.
At the end of May this year, Hengyi Petrochemical invested in Tongkun shares, and both companies have projects in Qinzhou, Guangxi. Among them, Tongkun Group plans to build a 2.8 million tons/year aromatics and 5 million tons/year PTA project. Through this kind of cooperation, the relationship between polyester companies will change from competition to joint cooperation. From 2014 to 2017, after the concentration of the PTA industry increased, although leading companies had mutually agreed on output, they still faced a “prisoner’s dilemma”, resulting in differences in actual output.
Once they become a community of interests in the future, their respective production capacity scheduling plans will be implemented more effectively, the market oligopoly model will be clearer, and the leading companies’ voice will be more significant.
</p
