The outbreak of the new coronavirus epidemic in early 2020 shattered original market expectations. The epidemic spread rapidly throughout China and even many countries around the world during the Spring Festival. This new virus is similar to and different from SARS in 2003. We tried to analyze the impact of the epidemic on the polyester industry chain based on the experience of SARS, the performance of external disks and the understanding of this type of virus.
01 Comparison between the new coronavirus and SARS
During the peak of SARS, various industry indexes did reach the lows seen some time before the virus emerged. It can be seen that large-scale infectious diseases do have a certain negative impact on the economy. The SARS epidemic emerged in Guangdong at the end of 2002 and also experienced the Spring Festival rush, but the growth rate of the number of infections was much lower than today. Three research reports from different institutions of higher learning established different models to estimate the basic infection number of the new coronavirus, and obtained three results: 3.8, 2.6 and 6.47 respectively. Compared with the basic infection number of SARS after isolation, which was only 0.4, the new coronavirus has a basic infection number of 0.4. There is basically no doubt that coronavirus is more contagious than SARS. As of February 4, 2020, the number of confirmed cases of the new coronavirus has far exceeded the number of SARS infections, and it is still showing an outbreak pattern.
In terms of scale, the scale of the new coronavirus will be larger than that in 2003, and due to the arrival of the peak period of return work, it is expected that a new wave of coronavirus will usher in in early February. The peak of the wave. There is a high probability that this epidemic will disappear in a few months as the body produces antibodies like SARS in 2003, rather than being cured. From a time point of view, the SARS outbreak occurred in the spring, and it had been a year since my country’s economy stabilized and recovered. However, this epidemic has been brought forward earlier, and my country has just ushered in the beginning of economic recovery, so the impact may be greater than before. obvious.
02 External market performance during the Spring Festival holiday
The main focus of external market during the Spring Festival is As for the performance of crude oil, we can see that the performance of crude oil futures almost follows the development of the epidemic. Since January 21, both U.S. oil and Brent oil have fallen continuously, with daily declines exceeding 2% many times. On February 3, U.S. oil fell 2.8%, the lowest closing price since January 2019. At the same time, due to the decline from January The high of $63.27/barrel hit on the 6th fell by 20.8%, marking that U.S. oil has officially entered a bear market. Brent oil fell 3.8%, hitting its lowest closing price since December 31, 2018.
Crude oil is the cost end of PTA and ethylene glycol. In the case of cost collapse, downstream chemicals, especially fundamentals, are inconsistent. A prominent PTA will most likely still follow changes in costs. After the market opened on February 3, the overall trend of chemicals fell sharply following the trend of crude oil during the Spring Festival, with PTA and ethylene glycol both hitting their daily limits.
03 The impact of the epidemic on The impact of the polyester industry chain
The impact of the epidemic on the polyester industry chain is more in two aspects: the suppression of terminal consumption and the delay in demand recovery caused by delays in downstream construction.
First, the terminal textile industry, as a labor-intensive industry, mostly shuts down for holidays during the Spring Festival. The operating rates of looms and texturing in Jiangsu and Zhejiang dropped to 10% and below. Due to the seriousness of the epidemic, many places such as Shanghai and Zhejiang have adjusted the resumption of work to after February 9, which is about 10 days later than the original holiday time. According to the resumption of work progress in previous years, 30% can be achieved in about 7-10 days after resumption of work. operating rate. This year’s Spring Festival is 10 days earlier than in 2019. The time for the loom operating rate in Jiangsu and Zhejiang to return to more than 30% should be similar to last year. After mid-February, however, as the apparel market is affected by the epidemic, there may be a continuation of the short-term downturn, and further increases in loom operating rates may be hindered. This means that it usually takes half a month to recover from 30% to more than 70%. This year, it may be extended to one month or more due to the transaction difference in the textile and clothing market.
Second, due to the unoptimistic estimate of the start-up rate of terminal looms, the demand for polyester products It may be further delayed, resulting in a later-than-expected increase in polyester operating rates, and the price of polyester products may fall significantly. The polyester operating rate calculated last week was 77.7%, and the operating rate during the Spring Festival holiday should be below 75%. Polyester’s upstream raw materials are mostly integrated and scale-intensive production models. Upstream raw material production is less affected by the epidemic. The deviation between the supply side and the demand side will increase the contradiction between supply and demand, leading to an unexpected accumulation of raw material inventories. PTA and ethylene glycol prices will be suppressed in the short term. Once the epidemic is under control, the prices of various products in the polyester industry chain will see a rebound.
Before and after the Spring Festival, the terminal consumption of the polyester industry showed a seasonal shrinkage, mainly due to the stagnation of production in the textile and garment industry, and the polyester enterprises inDuring this period, there were many maintenance operations, but the PTA device was mainly operating normally. Therefore, overall, PTA is facing pressure from accumulating inventory. According to research information from Longzhong Information, currently only Yisheng Ningbo’s 650,000 tons, Reignwood Petrochemical’s 1.4 million tons and Sichuan Energy Investment’s 1 million tons units are under maintenance, and the overall operating rate of PTA is at a high level of more than 90%.
The operating rate of the MEG plant has increased compared with before the holiday. Among them, the integrated unit is stable and the coal chemical plant has a slight increase in operation. Due to restrictions on truck transportation, inventory pressure in some factories has increased. Due to restrictions on terminal operations at the port during the holidays, shipments from the reservoir area have significantly cooled down, so port inventories have increased.
The maintenance volume of polyester equipment is around 15.8 million tons, and the overall operating rate is around 75%. Overall, the impact of the epidemic on the upstream is mainly limited to logistics, and has a greater impact on the downstream labor-intensive textile and apparel industry. The survey shows that the sample companies will resume work as early as February 10, which is 2-9 days later than the pre-holiday plan. However, February 10 is only the current tentative start time, and the actual resumption of production depends on the arrival of non-local employees. Make adjustments. The opening time of the textile market is also generally postponed until after the fifteenth day of the first lunar month. Judging from the inventory situation of terminal weaving enterprises, the inventory of raw materials is usually 10-30 days, and the inventory of high-end products is 40-50 days. The inventory of finished products is generally 10-15 days for warp knitting enterprises, and the inventory of gray fabrics for circular knitting and water-jet enterprises is 30 days. -The 40-day part is higher at 60-90 days. Therefore, under the influence of the epidemic, the resumption of work in the downstream textile and garment industry has been delayed, and the arrival of workers will be affected, resulting in terminal consumption being much lower than expected. Therefore, PTA and MEG are facing the pressure of declining consumption in the short term.
04 Regarding the duration of the impact
It is determined that the epidemic is at least It will last for several months. Regardless of whether the epidemic reaches an inflection point in the first quarter, March and the second quarter, it will affect terminal consumption and exports. Optimistic estimates suggest that the impact will last until the end of the first half of the year, while pessimistic estimates may extend into the second half. If the polyester operating rate is delayed, some small and medium-sized raw material factories may be forced to reduce their load and production. In previous years, the average operating rate in the last two weeks of the year was around 82%, and the average operating rate of polyester in the next half year could reach 92%. Affected by the epidemic, assuming that the operating rate remains at a low level of 75%, polyester production decreased by approximately 170,000 tons in February. , corresponding to a decrease in PTA demand of approximately 150,000 tons and a decrease in ethylene glycol demand of approximately 60,000 tons. Every time the epidemic lasts for one more month, polyester production will be affected by about 800,000 tons, PTA demand will decrease by about 690,000 tons, and ethylene glycol demand will decrease by about 270,000 tons.
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