Many manufacturers have recently restarted their PTA plants, including Hanbang’s 2.2 million ton plant and Shanghai Petrochemical’s 400,000 ton plant. Yangzi Petrochemical’s 350,000 ton plant, which has been shut down since trial production of IPA in December 2019, also restarted on June 23 The temperature is rising and restarting. In addition, Hengli Petrochemical’s new unit is scheduled to be put into operation in late June.
With the restart of the device, the PTA operating rate will increase. Large, the PTA market supply is expected to increase, and the short-term destocking in the early stage may be difficult to reproduce, and PTA is about to return to the accumulation channel. High inventories and expectations of increased supply have suppressed market prices to a certain extent and hindered PTA’s continued upward trajectory. Although PTA equipment has gradually resumed and restarted, supply and demand have shifted from destocking to destocking, but mainstream suppliers have participated in a small amount of buying, so that although the price has not risen, the decline has also encountered resistance.
Is the strong boost from the cost side sustainable?
Crude oil rose sharply again last week. Brent regained $40/barrel, while WTI also exceeded $40/barrel during the session, recording a new rebound high. Judging from the current fundamentals, the OPEC+ Ministerial Supervision Committee meeting held last week once again reiterated its determination to maintain production cuts, and Iraq also stated that it will increase production cuts in the future to make up for the unfulfilled production reduction targets in the early stage. Monthly reports from major markets also confirmed that the overall OPEC+ production reduction situation in May was relatively good. In the United States, EIA production data dropped by 600,000 barrels per day last week due to the impact of previous hurricanes. Overall, short- and medium-term production cuts on the supply side are still guaranteed, which has a strong bottom-up effect on oil prices. From the demand side, there are obvious signs of a second recurrence of the global epidemic, especially in Brazil, where the growth rate is still rising. However, after experiencing the first epidemic, even if a second epidemic breaks out, the negative impact on demand will be relatively limited, but it will delay the recovery process. Overall, we are cautiously optimistic about the improvement in demand, focusing mainly on the progress of destocking. The mid- to long-term focus of oil prices is still expected to slowly move upward.
PX prices have been boosted, and the price difference between PX and naphtha continues to recover. However, with high inventories, the market is cautious about the sustainability of PX’s rise. On the supply side, Hanbang Petrochemical has restarted as scheduled and is expected to release materials on the weekend. Shanghai Petrochemical also plans to restart. In addition, Hengli 5# line is scheduled to be put into operation at the end of the month. The pressure on the supply side is gradually increasing, while the downstream polyester load has declined slightly due to the maintenance of some devices. , PTA once again entered a state of accumulated inventory. PTA is still in a bullish trend in the short term, but as time goes by, without strong support from the cost side, the rebound momentum may fail.
Can the demand side be substantially improved?
The decline in demand and the stable output of new production capacity are the main reasons for the formation of high PTA inventory. Due to the impact of internal and external public security incidents, the traditional off-season of the polyester industry became lighter in the first quarter. The slow resumption of terminal work increased the pressure on the accumulation of finished product inventory in the market. PTA manufacturers’ inventory gradually climbed from a low inventory of 3-5 days to a high of 16-18 days. Inventory levels, capital and inventory pressure continue to ferment and restrict market prices and market confidence. In addition to declining demand as the main reason for the accumulation of inventory, the stable output of Hengli Petrochemical Phase IV and Zhongtai Petrochemical’s new production capacity also caused a significant increase in monthly PTA output, and the national output of PTA reached 4.24 million tons in May, a year-on-year increase of 24% , a record high. In the same month, PTA social inventory also climbed to more than 3.8 million tons, setting a record high.
The decline in demand and the launch of new production capacity have caused PTA inventory to accumulate rapidly. However, due to the greater flexibility of PTA warehousing capacity, the industry has remained stable even under high inventory pressure. High operating levels. The gradual improvement of domestic demand in the second stage has given support to market confidence, and the PTA production capacity operating rate has climbed to more than 90%. In fact, the premise of high inventory and high production is the improvement of industry profits, which mainly relies on profit concessions on the cost side.
Can the tightening of production improve the oversupply situation?
The competitive landscape of PX provides prerequisites for the PTA industry to enter the high processing range. Due to Zhejiang Petrochemical’s 4 million tons of new PX production capacity, supply competition inside and outside the PX industry has intensified, and a price war is imminent. PTA has been able to enter the comfort zone of high processing range, while the PX competition pattern has not improved due to the compression of profits, and the processing gap continues to shrink. to less than 160 US dollars, PTA benefited from this, and the processing difference once expanded to 900 yuan/ton. The expansion of the processing area has brought domestic PTA production equipment into a fully profitable stage. This stage has prompted domestic PTA production companies to pursue profit-making production. Even if multiple sets of equipment are forced to shut down, other companies in production once reached 110% load operation, thus directly forming PTA’s three high market conditions include high processing range, high start-up and high inventory.
In the second half of the year, the growth rate of PTA production capacity will further accelerate, which will prompt PTA to enter a new situation of industrial competition. At the same time, the PX competition pattern will be eased, and the profits of the industry chain will usher in The trend of redistribution and the three-high market will also usher in a break due to changes in the PTA supply and demand pattern.
Plan to put new PTA equipment into production in the second half of 2020
In the second half of the year, PTA plans to add 10.5 million tons of new production capacity. Far exceeding the 3.7 million tons increase in the first half of the year, combined with the current social inventory of 3.8 million tons, the launch of new production capacity is undoubtedly a catalyst for accelerating the rapid increase in the PTA supply side. Although the number of installations of more than 30 million tons during the year is still not Implement annual maintenance, but the maintenance time is generally 10-15 days, and the impact on the supply side is relatively limited. Especially in the second half of the year, after the centralized deployment of new production capacity, the continuous supply pressure on PTA will be brought. Centralized maintenance is only It is difficult to improve the competitive landscape of the market through staged improvements. According to the current plans for new production capacity, most of them are technologically innovative expansions. The new production capacity will see significant compression in terms of raw material unit consumption, energy consumption and other processing costs. The competitiveness of the industry has been further strengthened, and due to the excessive growth rate of production capacity, downstream polyester consumption is difficult to cover the increase in supply. Therefore, as competition intensifies, PTA’s profit level may be compressed to the edge of loss. It is estimated that PTA will lose 100-150 yuan per year in the second half of the year. tons, which will completely change the current profit level of 150-300 yuan/ton.
In addition, the growth on the demand side is difficult to cover the marginal increase on the supply side. It is planned to add 5.405 million tons of new production capacity during the year , has put into production a production capacity of 2.13 million tons, and plans to add 3.275 million tons of new production capacity in the second half of the year. The marginal consumption increase of PTA is 4.64 million tons, which cannot yet consume the increase brought by the supply side. Therefore, it can be seen that PTA profits will shift, and future supply and demand The impact of pressure on the PTA market will become more and more obvious. In addition, the terminal textile and garment industry is in an obviously weak situation. Whether it is the impact of the current public safety and health events or changes in Sino-US trade relations, it will also restrict the export and foreign trade orders of the terminal textile industry. Decline and poor receipt of new orders are still difficulties restricting the terminal textile industry.
In summary, public safety The improvement of the health incident and the implementation of the extension of crude oil production reduction are both bullish and the oil price market is showing a volatile and rising pattern. Under the influence of the upward shift in the center of gravity of crude oil, the PTA price range may gradually rise, but the industry’s profitability will be suppressed by the PTA supply side and the polyester demand side. , especially the large-scale investment in new production capacity will definitely bring PTA into a competitive landscape, while the demand side still faces the risk of declining foreign trade orders and insufficient domestic demand. The pressure of supply and demand will force PTA’s profit level to decline until it reaches a loss. Therefore, it is estimated that the PTA price range At 3600-3900 yuan/ton. Due to the obvious seasonal consumption of polyester, under the influence of the Golden Nine and Silver Ten, it is expected that PTA will have a certain recovery trend in the third quarter. In addition, the new pressure on the PTA supply side in the third quarter will also increase in the fourth quarter. Therefore, it is estimated that the quarterly price of PTA will show a trend of first high and then low in the second half of the year.
As supply increases, demand With the trend of inventory weakening, the PTA market is likely to change from inventory depletion to inventory accumulation. From the perspective of supply and demand structure, the market may be weakening. However, the rise in crude oil prices may provide certain positive support for the cost side. Although the room for crude oil to rise sharply may be limited, it is still in a state of strong volatility, which is undoubtedly good for the market. Therefore, the short-term PTA market may be weak due to accumulation of supply and demand, but the space below is limited. </p
