PX industry chain profits reshuffled

PTA is not only an end product of petroleum, but also a front-end product of polyester. From the perspective of the industrial chain, PTA is responsible for PX and crude oil, and is connected to polyester. The reconstruction of price differences in the three links of PX-naphtha, PTA-PX, and polyester filament-PTA has laid a solid foundation for the industry’s profit margins. However, with the changes in the refining and chemical structure, that is, the change in the pricing power of PX, the profits of the entire polyester industry chain have been redistributed.
PX pricing methods are mainly divided into three categories:
1. International closing price (CFR China, FOB Korea, FOB United States)
2. Sinopec listing price/settlement price
3. ACP (Asia Contract Price) Pricing Agreement
The ACP pricing model is mostly used in Asia: the buyer and seller sign an annual long-term contract, but the actual execution price is negotiated monthly. At the end of the month, the supplier (Japan JX, Japan Idemitsu, ExxonMobil, South Korea) S-OIL/Korea SKG) respectively announce next month’s advocates and buyers’ counteroffer negotiations. If two or more pairs reach an agreement, the ACP is announced. In the month when ACP is reached, the price is calculated based on 50% ACP + 50% average spot price per month.
In the ACP pricing agreement, Japanese and Korean companies have a strong say in ACP pricing, and most of the profits are taken away. However, as private refining and chemical PX is put into production, domestic PX will gradually turn to self-sufficiency, and the say in the ACP pricing agreement will become weaker and weaker. Domestic private enterprises will also further gain active pricing power, and the original profits of Japanese and Korean enterprises will Significantly reduced, the profits of the industrial chain will continue to move downward to PTA and downstream polyester.
PX production capacity has been released intensively, prices have been under downward pressure, and the supply pattern has changed
In recent years, the global PX industry chain pattern has undergone significant changes. Mainly caused by the substantial expansion of China’s production capacity. Among them, 80% of the increase in PX production capacity comes from China, and China’s proportion of PX production capacity in the world has increased significantly. According to statistics, PX accounted for 27% of the world from 2016 to 2018, and approximately 37% during 2019-2020. With the acceleration of domestic PX production in recent years, my country’s import dependence will slightly decrease significantly, and the days of high PX dependence in the past will be gone forever. In the future, the pricing model of South Korea, Japan and other countries will be gradually broken, and profits will be transmitted downstream from PX to PTA and the terminal downstream textile and garment industry.
From 2016 to 2018, the apparent consumption of PX increased from 21.7048 million tons to 26.005 million tons, an increase of 19.81%. The self-sufficiency rate was only 38.84%. The problem of external dependence was relatively prominent, with the import volume being 15.9051 million tons. As of the second half of 2019, the tight supply and demand pattern of PX has improved significantly, with the self-sufficiency rate reaching 69.7%. The pricing model of Japan and South Korea has been broken, and PX prices have fluctuated at low levels.
Profit has gradually been transferred from upstream PX-naphtha to PTA-PX
Judging from the cracking price difference of PX-naphtha from 2018 to 2019, it has declined from the highest of US$712/ton at the end of August 2018 By the end of 2019, it was around US$259/ton, a decline of nearly 63.6%. If the PTA-PX link price difference in 2018 is calculated based on the CFR China Taiwan PX central price and the refined terephthalic acid PTA external price in the CCFEI price index, the average PTA-PX price difference in 2019 will remain at -147 US dollars/ton. The average price spread in 2018 remained at -US$201/ton, and the market center of gravity moved up to US$54/ton. Profits have moved downward from PX-naphtha to PTA-PX, causing the PTA-PX price difference to expand.
Considering that the overall downstream demand this year is not strong, the downward pressure on the price of downstream polyester products is relatively large, and the overall profit margin is relatively limited. However, in the later period, the low cost of integrated refineries will further depress PX prices in 2020, and there is the possibility of further downward transmission in the later period. </p