Recently, the spread of the COVID-19 epidemic around the world has continued to trigger risk aversion in the market, and global stock markets and commodity markets have experienced sharp declines. The number of confirmed cases of the epidemic abroad continues to increase, and panic is weighing on crude oil prices. U.S. oil fell more than 15% on the week, and PTA futures prices also began a second dip.
Emergency: The epidemic leads to downstream demand Insufficient follow-up; current situation: Regardless of the impact of the epidemic, both internal and external terminal demand are weak
In this public health emergency, the PTA industry chain has been most affected by terminal weaving companies. When will the downstream Being able to resume production has become the market’s biggest concern. Although many companies plan to resume work after mid-February, due to the upgrade of local governments’ protective measures against the epidemic, as well as traffic control and isolation periods for non-local workers returning to work, so far, the comprehensive start-up rate of chemical fiber weaving in Jiangsu and Zhejiang has been Only 38%.
Judging from previous years, weaving companies can usually enter normal production 2-3 weeks after the Spring Festival. However, due to the impact of the epidemic this year, weaving factories can only gradually recover in early March at the earliest, and demand lags behind at least One month.
The slow recovery of production in weaving factories has made it difficult for polyester manufacturers to increase their operating load. Under the pressure of poor sales, a total of 4.67 million tons of polyester factory production capacity was suspended in February. In addition, the restart plan of equipment for maintenance before the Spring Festival continues to be delayed. The current operating load of polyester manufacturers is only 64%. Still, polyester factory inventories continue to climb.
As of now, the inventories of POY, FDY and DTY, the main polyester products, have risen to 29, 30 and 36 days respectively, which is 2-3 times that of the same period last year, and even greatly exceeded the entire last year. annual inventory peak. Before the weaving market fully resumes work, poor production and sales may cause polyester manufacturers to continue to increase their inventories, making it difficult to significantly increase the operating rate of polyester devices in a short period of time, thereby dragging down PTA demand.
Regardless of the impact of the epidemic, the terminal market is still facing an adverse situation. From the perspective of terminal domestic demand, more than 70% of polyester terminals are related to textiles and clothing. Therefore, it is necessary to base on textile The strength of demand for polyester can be judged by the sales of clothing. Since textiles and clothing are daily consumer goods, their general trends are highly correlated with my country’s overall economic status, GDP. Judging from historical data, my country’s economic cycle lasts about four years.
The current polyester boom cycle started in the second half of 2016. Currently, profits have entered a state of loss. Clothing sales have peaked compared with the same period in early 2018, and the current growth rate remains around 3%. The current low level of GDP growth is low. Therefore, even if there is no impact of the epidemic, domestic demand for textile and apparel will remain weak at least until the first half of 2020.
On the other hand, terminal external demand is not optimistic. From January to November 2019, my country’s exports of textile yarns and fabrics and products, as well as clothing and clothing accessories, a cumulative year-on-year decrease of 3.09%. The overall growth rate in 2019 has dropped significantly compared with previous years, entering a stage of negative growth. And with the uncertainty in Sino-US relations and the expected decline in the global economy, it is expected that the export situation will still be difficult to improve significantly in the short term.
In addition, in recent years, domestic end-use textile and apparel companies have also increased their capacity transfer to Southeast Asia and other regions, as well as the rapid development of the textile industry in Turkey, Brazil and other places, resulting in domestic textile and apparel Decrease in direct exports of finished products.
Supply is still a long-term hidden danger, and PTA processing fees have entered a stage of careful calculation
I remember that from 2015 to 2016, the main logic of market operations at that time was to frame the operating range of PTA based on processing fees. This was a special product of the industry clearing stage in the context of overcapacity. Later, PTA entered a boom cycle due to the postponement of production capacity, and the logic of operating according to the processing fee became less important.
In 2020, the surge in domestic PX production capacity has reduced the cost of PTA production. The current raw material cost of PTA has dropped by nearly 2,000 yuan/ton compared with the same period last year. However, the substantial expansion of PTA production capacity has failed to enable the PTA industry to taste the sweetness of upstream profit transfer. Since the end of 2019, the successive releases of units such as Xinfengming, Xinjiang Zhongtai and Hengli Petrochemical have directly increased production capacity by nearly 6 million tons. PTA units are generally less affected by special events. With the formation of these new production capacities In terms of market supply, the growth rate of PTA production capacity is much greater than the growth rate of polyester production capacity, and the loose supply of PTA is clearly evident. Recently, PTA spot processing fees have fallen sharply and remain at a low level of around 400 yuan/ton. The processing range will be compressed to a lower range again, and the idea of operating according to the processing fee will once again return to the public eye.
Quoting PTA cost estimates, the processing fee will fluctuate in the range of 300-500 in 2020, with a higher upper limit of about 600 (that is, the cash flow cost of old small devices).
The active destocking strategy of the industrial chain under pessimistic expectations is affected, and the difficult days have just begun start!
Especially since the second half of 2019, one characteristic of the operation of the polyester industry is that the expected production capacity cycleWith the period falling, coupled with the demand uncertainty caused by the trade war, the entire industry is in a process of active destocking (the entire chemical industry has similar characteristics). Among them, the polyester link is the most obvious.
According to the experience of previous years, polyester inventory can tolerate a certain periodic accumulation of inventory. Since the second half of the year, we have seen a significant increase in active promotions of polyester, and we are willing to give up profits when our own benefits are acceptable. Downstream, ensure its own low inventory operation. However, raw material inventories at the polyester end and the weaving end are not very high due to pessimistic expectations, which results in the overall inventory of the entire industry chain being relatively low.
So from the perspective of the polyester upstream industry chain, once the post-holiday start-up is expected to improve, let’s not talk about the fundamentals of supply and demand. The price increase brought about by improvements and speculative inventory replenishment alone may lead to a considerable rebound, especially for varieties with ultra-low inventories. However, the mismatch between PTA and downstream markets during the Spring Festival, coupled with the release of new production capacity, is enough to make the market begin a difficult period even if the epidemic does not occur.
Under the influence of the COVID-19 epidemic, the lack of follow-up on downstream demand after the Spring Festival has accelerated the accumulation of PTA manufacturers’ inventory. As of last week, PTA’s social circulation inventory has exceeded 2 million tons. High inventory and low cash flow have inhibited PTA companies’ production willingness, and many units have passively reduced production since February. At present, the overall operating rate of the PTA industry is 79.9%. In all links of the entire industry chain, the load of PTA factories is still high. If inventory pressure continues to increase in the future, more PTA companies will be forced to reduce their load and production.
Recently, the epidemic has begun to spread abroad, market concerns have rekindled, and PTA futures prices have also begun to drop for a second time. In short, the current epidemic has not yet been completely eliminated. It will still take time for terminal weaving enterprises to fully recover. The industry’s high inventory also needs to be digested urgently. The PTA market is still facing correction pressure. </p
