PTA prices have been strong recently, with the 2009 contract rising to a maximum of 3,808 yuan/ton from 3,128 yuan/ton in late April. The reason for this is that the center of gravity of cost value has moved upward. Looking at the market outlook, weak demand will inevitably drag down the PTA market, but upstream cost support cannot be ignored. Investors can seize the opportunity of the correction and do more at the right time.
With the strong rebound in oil prices, the PTA market has shaken off the trough and has also rebounded. Under the combined effect of various factors, PTA prices are expected to face the risk of a correction in the short term, but the long-term focus of operation will still shift upward.
Crude oil output is expected to tighten
In order to reverse the decline of the crude oil market, on April 13, OPEC+ reached a historic production reduction agreement, and on May 1 —On June 30, production was reduced by 9.7 million barrels per day. On June 6, OPEC+ held a ministerial meeting via video and reached an agreement on extending the scale of production cuts. According to the agreement, OPEC+ will extend production cuts until July 31. At the same time, countries that failed to meet 100% of their production reduction quotas from May to June will make additional production cuts from July to September to make up for it. In addition, in order to supervise the implementation of production cuts, the OPEC+ Joint Ministerial Supervision Committee will meet monthly until December. Crude oil prices rebounded due to the OPEC+ production cut intervention, with Brent crude oil climbing from a low of $15.98/barrel on April 22 to a high of $43.92/barrel on June 8.
As for the crude oil market outlook, the author believes that output will continue to shrink.
First, OPEC will implement production cuts well. According to statistics and calculations, in May, the production reduction compliance rate of OPEC member countries was 85.31%. Specifically, among member countries, Saudi Arabia, the United Arab Emirates, and Kuwait were close to or even overfulfilled their production reduction tasks. High oil prices are in the interest of all OPEC countries. The member countries have changed from the radical sentiment of increasing production to seize market share at the OPEC+ meeting in March. They all hope to stabilize and increase oil prices by extending the scale of production cuts and urging oil-producing countries to implement production cuts.
Second, Russia’s production reduction has been implemented well. On June 2, the media reported, citing data from the Ministry of Energy, that Russia’s crude oil and natural gas condensate production dropped to 39.7 million tons in May, down from April’s daily production of 11.35 million barrels. According to the agreement reached between Russia and OPEC, Russia promised to reduce daily production by about 2.5 million barrels per day to 8.5 million barrels per day. The agreement does not include the production of natural gas condensate. Russia’s daily production of condensate is usually between 700,000 and 800,000 barrels, which means that the country’s crude oil production in May was between 8.59 million and 8.69 million barrels per day.
Thirdly, U.S. production is declining. Data show that in the week ending June 5, the average daily production of U.S. crude oil was 11.1 million barrels, 100,000 barrels less than last week and 1.2 million barrels less than last year. In the four weeks ending June 5, the average daily production of U.S. crude oil was 11.1 million barrels. It was 11.3 million barrels, down 8.1% from the same period last year. Investment in shale oil has shrunk, and U.S. production is expected to continue to decline in the future.
Data from the International Energy Agency show that in May, the average daily supply of global crude oil plummeted by nearly 12 million barrels, while demand fell by 8.1 million barrels to 91.7 million barrels, the largest drop in history. It is expected that the daily average next year Demand will increase by 5.7 million barrels. The report said that if the demand recovery momentum continues and oil-producing countries insist on tightening supply, then “the market will stabilize before the end of the second half of 2020.” Previously, the U.S. Energy Agency believed that supply and demand would be basically balanced in the third quarter.
The trend of PX continues to be weak
In 2019, new PX production capacity in Asia includes 4.5 million tons of Hengli Group Dalian and 600,000 tons of Sinochem Hongrun , Hainan Refining and Chemical 1 million tons, Hengyi Brunei 1.5 million tons, Zhejiang Petrochemical 4 million tons and Liaoyang Petrochemical 230,000 tons, totaling 11.83 million tons. Among them, the PX produced by Hengyi Brunei is mainly digested domestically, and this production capacity is calculated within the scope of China’s production capacity. At the end of 2019, my country’s PX production capacity was 26.04 million tons, and Asia’s PX production capacity was 61.182 million tons. At the same time, the effective domestic PTA production capacity is 53.66 million tons, and the effective PTA production capacity in Asia is 65.64 million tons. There is an oversupply of PX in Asia, and prices and profits are falling simultaneously. As of June 16, 2020, the price difference between PX and naphtha was 172 yuan/ton.
2019 is only the first year of PX production. With the rapid expansion of domestic private refining and chemical production capacity, PX will still be put into production in large quantities in the following years. According to statistics, 3.8 million tons of domestic production capacity will be put into operation in 2020, 6.6 million tons of production capacity will be put into operation in 2021, and 7.79 million tons of production capacity will be put into operation in 2022. Calculated based on the PTA production growth rate of 6% in 2020 and the growth rate of 7% in 2021 and 2020, my country’s PX will be completely self-sufficient in 2022. In the process, there will also be PX products from peripheral countries such as Japan and South Korea. Clear out.
The operating rate of PX equipment was low from January to February 2020. The main reason was that the new equipment of Zhejiang Petrochemical was put into operation, which lowered the overall operating rate. Excluding the decrease in operating rate caused by equipment failure in early April, the operating rate of PX equipment in the rest of the year is generally at a higher level compared with previous years. With the production capacity base significantly increased, PX output has also increased significantly. In May, my country’s PX output was 1.6902 million tons, an increase of 14,000 tons month-on-month and a year-on-year increase of 46.38%. As of the end of April, PX social inventory was 2.5 million tons, a new high.
The price difference between PX and naphtha has fallen to a low of 160-170 US dollars/ton. Most companies are in a state of loss, and the maintenance plan of the PX factory is still unclear. It is not ruled out that the PX factory will correct it by reducing production suspension in the future. profit. Considering that the bargaining power of the PX plant has been weakened, mid- to long-term price increases can only rely on the rise of the crude oil market.
PTA social inventory may rise again
This year is the year of intensive launch of new PTA equipment, and production capacity faces the risk of overcapacity. According to conventional logical reasoning, in the context of oversupply of PTA, processing fees will be at a neutral and low level. However, in the chemical market this year, crude oil dominates, and PTA processing fees are relatively optimistic.. At present, the PTA processing fee is around 800 yuan/ton. Driven by high profits, PTA factories are highly motivated to start operations. The units of Xinjiang Zhongtai, Yangzi Petrochemical, and Hainan Yisheng that were originally planned to be overhauled in June have all been postponed.
In May, domestic PTA output was 4.23 million tons, an increase of 90,000 tons from April, and a year-on-year growth rate of 9.84%. In June, affected by the unexpected shutdown of Hanbang Petrochemical’s annual production capacity of 2.2 million tons, the PTA market was in a state of slight destocking, reaching 3.75 million tons, a decrease of about 90,000 tons from the inventory at the end of May, but an increase of 247.7% from the same period last year. million tons, still at a high level.
The picture shows the price, cost and profit of PTA
In contrast, in May, polyester production was 4.58 million tons, An increase of 340,000 tons from the previous month and an increase of 65,000 tons from the same period last year. Currently, the operating load of polyester factories remains at 85%, and output has increased to a certain extent both month-on-month and year-on-year. The increase in polyester production is mainly due to the following reasons: First, polyester production capacity is gradually put into operation. Dalian Yisheng has a polyester bottle flake device with an annual production capacity of 350,000 tons, and Chongqing Wankai has an annual production capacity of 600,000 tons of polyester bottle flakes. The device and Xinfengming Zhongyi’s filament device with an annual production capacity of 300,000 tons were put into operation, which increased the polyester production capacity to 60.07 million tons in May; secondly, the international oil price rebounded strongly. Under the psychological stimulation of “buy up, not buy down” , downstream enthusiasm for stocking is high, and polyester production and sales are increasing; thirdly, polyester factory inventory pressure is not great.
However, it should also be noted that although the polyester factory has a good start-up stage, it has not been supported by terminal consumption.
my country is the world’s largest textile and apparel exporter, and the epidemic has had a huge impact on the textile and apparel industry. According to customs data, from January to April, my country’s textile exports were US$39.167 billion, a year-on-year increase of 1.32%; clothing exports were US$30.971 billion, a year-on-year decrease of 21.99%. At present, textile export orders are still weak, and many companies have skipped summer orders and directly produced autumn and winter fabrics. The inventory of weaving factories is high. So far, the order volume of several major European customers such as Spain and Italy has only returned to 40%-50% of the level of the same period last year. Not only are there almost no large orders, but the contract prices are very low. Due to concerns about the continuous rise in raw material prices, high labor costs, and the need for frequent equipment debugging for different varieties, domestic textile and garment companies are relatively reluctant to small-volume, multi-batch, unprofitable orders. Some companies would rather reduce production or shut down production than accept orders. Such export orders. Weakness in the textile and apparel link is naturally transmitted to the upstream weaving link, and weakness in the weaving link is also naturally transferred to the polyester link, thereby affecting the PTA link.
Based on the above analysis, based on the processing fee of 500 yuan/ton, the reasonable value of PTA is 3,360 yuan/ton; based on crude oil accounting, the reasonable value of PTA is 3,514 yuan/ton. Therefore, it is recommended to go long PTA contracts in the long term based on the expectation of stronger crude oil. </p
