With the official commissioning of Xinfengming Dushan’s 2.2 million-ton PTA plant in November, my country’s PTA supply and demand pattern will once again enter a phase of excess. The new PTA production capacity next year is expected to reach 15.3 million tons. The new expansion cycle will definitely bring about earth-shaking changes to the development of the industry.
1 The future pattern of cost-side PX
2015-2018 During this period, China’s PX supply situation has become normal. Due to the constraints of industrial characteristics such as high project requirements, long return cycles, and private resistance, domestic production is insufficient to support domestic demand, and import dependence is high. Affected by the market supply and demand gap, high profits, and the influence of national policies, domestic PX started centralized production mode in 2019, showing a development trend of covering the entire “refining-aromatics-polyester” chain.
In May 2019, Hengli Petrochemical’s 4.5 million tons of new PX capacity was put into operation, Hongrun Petrochemical’s 600,000 tons/year was put into operation in August, and Hainan Refining and Chemical II was put into operation in October. An average of 1 million tons per year in the current period has been commercially operated. In the fourth quarter, Zhejiang Petrochemical has the possibility of launching it. It is expected that the new production capacity will be as high as 11.9 million tons during the year, a year-on-year increase of more than 50%. As the supply of PX increases, the cost of PTA decreases. The price of PX has dropped from US$1,100/ton at the beginning of the year to less than US$800/ton currently. The sharp drop in price has made the profit of the PX industry shift to PTA more obviously. Under the logic of cost collapse, PTA Prices fell sharply.
If the new projects proceed as planned, PX will be in a large-scale production cycle from 2020 to 2023, and domestic new production capacity will be added Most of them aim to extend the industrial chain. In the future, domestic PX will compete fiercely with imported PX. The industry will also enter a stage of optimization and upgrading, and some old devices may face being eliminated.
2 Changes in PTA profits during the production cycle
The main factors affecting PTA’s profitability include supply, demand and cost. PTA has entered a major production cycle, and profits are expected to decline. The profit level of the industry affects the intention of production companies to start operations, and ultimately affects the supply and demand situation of the industry.
In 2011, driven by the expansion of profits and demand, PTA entered the production cycle, and the concentrated release of production capacity led to a substantial loss of PTA profits. In the case of overcapacity, profits have been in a state of loss for a long time. The industry has independently eliminated some backward production capacities, causing supply and demand to become tightly balanced. As the industry’s prosperity rebounds, PTA’s profits continue to recover. In the third quarter of 2019, Dushan Energy’s 2.2 million tons of new production capacity was put into operation, marking that PTA has officially entered a new round of large-scale production cycle.
The processing difference is negatively correlated with the growth rate of production capacity. Since 2010, as the PTA production process has accelerated, the growth rate of production capacity has reached a maximum of 57%. At this time, the processing difference of PTA is from The annual average value in 2010 dropped from around 2,400 yuan/ton to an annual average value of around 650 yuan/ton in 2013. Since then, the processing difference of PTA has been fluctuating in a relatively low range. Until 2018, with the emergence of periodic production capacity mismatch, the processing difference of PTA increased significantly. In 2019, the profit distribution of the industrial chain began to tilt toward the raw material side. In the process of profit transfer, the weaker products contributed their own profits, which led to a significant decrease in polyester profits. The decrease in polyester profits has affected the enthusiasm of polyester factories for production. Polyester factories have successively reduced production and reduced burdens. On the PTA side, profits have been retreating rapidly due to suppressed demand. As PTA enters a major production cycle in the future, industry profits may trend towards the downstream.
3 Changes in PTA supply and demand during the production cycle
From the supply side data, as of October 2019, the total supply of PTA was 37.14 million tons, a year-on-year growth of 7%. The sources of supply-side increment in 2019 are mainly the resumption of production of 2.4 million tons of Fuhua in February, the commissioning of 1 million tons of new production capacity of Sichuan Energy Investment in May, and the postponement of PTA’s high-load production and maintenance plans under profit-seeking production.
The growth rate of PTA downstream demand continued to decline from 2017 to 2019, from around 13% to around 7%. From the perspective of demand-side data, as of October 2019, the total demand for PTA was 36.54 million tons, a year-on-year growth of 7%. In 2020, under macroeconomic pressure, the growth rate of the terminal textile and apparel industry and the home textile industry is difficult to say optimistically. Therefore, the slowdown in the growth rate of PTA terminal consumption may become a trend. According to statistics, the new polyester production capacity in 2020 is expected to reach 5.15 million tons, corresponding to an increase of about 4.3 million tons of PTA demand, which is far less than the 15.3 million tons of PTA production capacity planned to be put into production in 2020.
4 Summary
PTA processing fee has dropped to 500 yuan/ Below tons, the PX processing of some devices has entered the loss range and is close to the lowest in history. It cannot be ruled out that due to pessimistic expectations, PX and PTA processing fees have reached new lows.
According to the financial statements of listed companies, the processing costs of newly put into operation large-scale PTA devices have dropped from 550 yuan/ton in previous years to 200-300 yuan/ton. Excessive production capacity expansion has intensified competition in the PTA market. Some companies have weak production capabilities and relatively high costs.Older devices with higher temperatures will be phased out. </p
