The current surge in global panic, the onset of the “crude oil price war”, the collapse of PTA costs, and poor domestic demand and exports in the terminal textile industry market have resulted in slow shipments and weak transactions in the PTA market. The main contract market continues to hit record lows, the overall market trend is weak, and low oscillations dominate.
Costs collapsed and prices went down
The crude oil market was thrilling last week, with a weekly decline of more than 20%. First, the non-OPEC production reduction agreement led by OPEC and Russia failed. Coupled with the spread of the new crown pneumonia epidemic abroad, crude oil recorded the largest single-day decline since 2014. Afterwards, Saudi Arabia significantly lowered its official sales price in April and increased crude oil production in April. Superimposed on the increase in U.S. crude oil inventories for seven consecutive weeks, crude oil returned to decline. Although various countries have also introduced corresponding policy stimulus, the market does not buy it and continues to maintain a low oscillation pattern.
On March 18, Saudi Arabia announced that it would increase crude oil exports to a record high of 10 million barrels per day. Goldman Sachs lowered its second-quarter Brent oil price forecast from $30/barrel to $20/barrel. International oil prices fell across the board, with NYMEX crude oil futures closing down 6.17% at $27.21/barrel, and Brent oil closing at $30.5/barrel down 3.76%. Compared with prices in early March, WTI and Brent oil prices have almost halved.
Affected by the sharp decline in crude oil prices, PX also suffered a cliff-like decline. As of the close on the 17th, the closing price of the Asian PX market was US$572.67/ton CFR China and US$554.67/ton FOB South Korea. , a decrease of US$125/ton from the beginning of March, a decrease of 17.91% and 22.54% respectively. The center of gravity of the PX market has shifted downward, which means that the cost center of gravity of PTA has declined. Judging from the lowest price of the main contract since the beginning of March, the center of gravity of the PTA market has moved down by 674, down 15.67%.
Based on the current PX price and a processing fee of 500 yuan/ton, the cost of PTA should be around 3,570 yuan/ton, which is close to the market price.
Crude oil and PX price charts
PTA cost trend chart (yuan/ton)
Based on the lows of crude oil and PTA prices in 2016 , the price of PTA has hit a new low since its listing, while the crude oil above is still slightly higher than the low in 2016, and PTA is already in an oversold state. Moreover, the added value of industries above designated size nationwide from January to February 2020 has been further confirmed. From January to February, the added value of industries above designated size actually fell by 13.5% year-on-year. In February, the added value of industries above designated size decreased by 26.63% from the previous month. Among them, the textile industry dropped by 27.2%, and the manufacturing industry of chemical raw materials and chemical products dropped by 12.3%. From a data point of view, the decline in the textile industry is nearly twice that of chemical raw materials, which is at a low point in recent years.
Terminal demand is not good, and major PTA manufacturers are focusing on reducing burdens and pressure
As the spread of the new coronavirus pneumonia epidemic intensifies overseas, global panic increases, and large outbreaks of infections have occurred in Europe, North America, Southeast Asia and other places. At present, many countries have declared a state of emergency and introduced a series of measures such as country closures and city closures. Similar to the previous domestic situation, we are bound to enter a state of working from home and some companies semi-suspension to varying degrees. Of course, this situation will also lead to a sharp reduction in the number of domestic and foreign trade orders, which will suppress the production enthusiasm of manufacturers. Although exports are resumed in the early stage, they will still face the following two problems. First, after the terminal goods are exported to the destination port, the efficiency of customs clearance and transshipment will be greatly reduced, the transportation time will be extended, and a lot of additional terminal storage and other costs will be incurred. Secondly, due to the impact of the epidemic, downstream receivers may not pick up the goods or abandon the goods. So overall, it has caused immeasurable losses to exports.
The domestic market demand is sluggish, and it is difficult to see a significant improvement in the short term. According to data from sample companies monitored by China Silk Capital Network, the current inventory of weaving manufacturers is about 38 days. Although the epidemic has been well controlled in China, there has been no major improvement in the downstream market so far, and the destocking cycle in the later period is relatively long. Moreover, according to a survey by the China National Garment Association on the resumption of work and production of garment companies, as of March 6, 29.4% of the companies surveyed reported that orders had decreased due to factors such as sluggish market demand, order cancellations, and some companies reported a sharp decline in domestic orders.
In view of the poor overall demand at home and abroad, major PTA manufacturers have begun joint maintenance to alleviate market inventory pressure. As of March 17, the PTA unit operating rate dropped to 69.17%, mainly due to the 4.5 million tons/year PTA unit of Fuhaichuang being inspected for 10-15 days near March 12; the 2.2 million tons/year PTA of Hengli Petrochemical Line 3 The device started maintenance for two weeks on March 12; Xinfengming’s 2.2 million tons/year device entered maintenance for half a month on the 17th, but the effect was minimal judging from the feedback from the disk.
Taken together, the current supply and demand support in the upstream and downstream PTA markets is still weak, prices are at historically low levels, and there is a lack of major Guided by the good news, there is no sign of reversal in the short term, with low and weak oscillations being the main trend. </p
