Affected by the pneumonia epidemic caused by the new coronavirus in China, the entire energy and chemical sector fell sharply on February 3, and the main PTA contract 2005 showed a “one-word” limit throughout the day; on the morning of the 4th PTA futures prices also opened sharply lower, with the 2005 contract as low as 4,236 yuan/ton, a new low since mid-January 2016. Although PTA futures prices have rebounded since then, the overall price is still at a low level in the past five years. Regarding the market outlook, we believe that since the turning point of the domestic epidemic has not yet appeared, and the demand performance has not recovered, PTA futures prices will continue to be weak in the short term.
Market concerns are released
December 30, 2019 Wuhan City reported for the first time a patient with pneumonia of unknown origin, which was later officially confirmed to be COVID-19. As the epidemic began to spread, Wuhan City announced that it would temporarily close the airport and train station departure channels from Wuhan starting at 10 a.m. on January 23. Many provinces and cities across the country announced the launch of first-level response. After the Spring Festival, the resumption of work of enterprises was postponed and many places were suspended. With inter-provincial shuttle buses and intra-city transportation reduced or suspended, the 2020 Spring Festival holiday was spent in a completely different atmosphere. Due to concerns about the decline in demand caused by the domestic new coronavirus epidemic, the international market generally experienced continuous declines during the Spring Festival holiday. International oil prices, which are the “wind vane” of the energy and chemical sector, even fell sharply.
From January 23 to 31, WTI crude oil fell by 7.31%, and Brent crude oil fell by 8.72%. In the domestic market, although the official domestic manufacturing PMI in January was still above the critical point, delays in construction starts and short-term consumption decline caused by the epidemic still increased market concerns. The sharp drop on February 3 was also positive. It was caused by the concentrated release of market concerns. After market concerns are released and digested, changes in PTA’s own supply and demand fundamentals will once again become the dominant force in its price trends.
PTA plant construction starts remain at a high level
Due to the closure of large-scale PTA plants The cost of restarting after a shutdown is relatively high, and there are also uncertainties such as failure or substandard finished products in restarting. Therefore, domestic PTA equipment usually maintains normal operation during the Spring Festival holiday, and only needs to be repaired in the event of a malfunction or annual maintenance. Stop during maintenance. During the Spring Festival of 2020, Ningbo Yisheng’s 650,000 tons/year and Reignwood Petrochemical’s 1.4 million tons/year units were shut down for maintenance, while Yisheng’s 2.25 million tons/year unit restarted on January 27. The start of domestic PTA units was higher than before the holiday. Slightly improved.
In recent days, the number of domestic PTA equipment shutdown plans has increased. Hanbang Petrochemical’s 600,000 tons/year unit has been shut down for maintenance, and Yadong Petrochemical’s 700,000 tons/year unit has been shut down for maintenance in February. On the 3rd, it was shut down for maintenance for 3 days. The 350,000 tons/year unit of Yizheng Chemical Fiber was shut down for maintenance on February 5. The load of Ningbo Taihua’s 1.2 million tons/year unit was reduced to 70%. The domestic PTA unit operation dropped to 86.47%, compared with It dropped by 3.85 percentage points on February 1. Although equipment maintenance has increased, due to the limited production capacity of maintenance equipment (the total production capacity involved is about 1.31 million tons/year), the decline in PTA supply is expected to be relatively small. The supply of PTA is still relatively loose in the near future.
The resumption of work of enterprises is further delayed
For PTA downstream polyester enterprises and Terminal textile enterprises have a large number of migrant workers who need to return home to visit relatives during the Spring Festival holiday. Therefore, the company’s annual holiday time will be longer than the national statutory holidays. Judging from the situation in previous years, the concentrated resumption time of downstream enterprises is usually after the Lantern Festival every year. In 2020, affected by the domestic COVID-19 epidemic, many provinces and cities have announced the postponement of the resumption of work of enterprises. Jiangsu, Zhejiang, Fujian and other provinces have stated that the resumption of work of enterprises should not be earlier than February 9. On February 4, two major domestic cluster markets, Shengze Oriental Silk Market and Keqiao, once again issued notices of postponement of resumption of work. The opening time of the two major markets was postponed by 7 to 10 days compared with the earliest resumption time of each province and city. The delay in the opening time of the terminal market also basically indicates a further delay in the resumption of work of terminal weaving enterprises, which may force the resumption of work of polyester enterprises to be postponed.
The picture shows the daily operating rate of the polyester factory (unit: %)
The picture shows the daily operating rate of looms in Jiangsu and Zhejiang (unit: %)
Currently, many provinces and cities have adopted measures to suspend inter-provincial shuttle buses and adjust city services out of consideration for epidemic control. Measures such as the running time and intervals of public transportation within the province and the isolation and observation of people entering the province have resulted in certain restrictions on the return of workers from polyester companies and terminal textile companies. As the COVID-19 epidemic has not yet reached an obvious “turning point”, some workers are also willing to wait until the epidemic situation improves before going out to work. This makes it difficult for companies to obtain enough workers for production in the short term, and will also force companies to delay their resumption of work. time. We predict that in the short term, the operating rate of polyester factories and terminal looms will continue to be at a low level during the year, and the demand performance of PTA, as the upstream raw material for polyester, will be difficult to improve. As of January 21, the daily operating rate of domestic polyester factories was 72.88%, and the operating rate of looms in Jiangsu and Zhejiang was 8.3%. As of February 6, the production capacity of the polyester device still under maintenance reached 18.29 million tons/year, and according to the plan, another 1.88 million tons/year production capacity device will enter maintenance in the later period.
Social inventories have hit a new high in recent years
Since early December 2019, domestic PTA social inventory has begun to enter a state of continuous accumulation, and the extent of accumulation has shown a trend of expanding week by week. During the Spring Festival holiday, as PTA equipment maintained normal operation while downstream polyester and terminal weaving companies concentrated on suspending production and taking holidays, PTA social inventory increased significantly. As of January 31, the domestic PTA social inventory was 1.98 million tons, an increase of 230,000 tons from January 24, a significant increase of 1.08 million tons from the same period in 2019, and a new high since April 10, 2015. In the current situation where demand is difficult to increase, PTA social inventory is expected to continue to maintain a cumulative inventory situation, and high inventory pressure will suppress PTA futures prices.
The picture shows PTA social inventory (unit: 10,000 tons)
On the supply side, despite the recent shutdown of PTA equipment for maintenance, The situation has increased, but overall it is still at a relatively high level. On the demand side, due to the impact of the domestic new coronavirus pneumonia epidemic, the resumption of production of terminal weaving enterprises has been delayed again. It is also difficult for polyester enterprises to gradually resume normal production after the Lantern Festival as in previous years. It is difficult to increase the demand for raw materials in the short term. PTA social inventory The inventory continues to accumulate and the inventory has reached the highest level in the past five years. Although the worries accumulated during the Spring Festival holiday have been basically released in last Monday’s sharp drop, the inflection point of the current epidemic has not yet appeared, and market worries may still increase again, thus suppressing PTA futures prices. Generally speaking, PTA futures prices will mainly run weak in the short term. In the medium term, as the production of downstream companies gradually resumes, PTA futures prices are expected to usher in a phased rebound, but this point still depends on the development of the epidemic.
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