The polyester industry hopes that PX and bottle flakes will join the futures “family”
“Industrial hedging encounters pain points and we look forward to improving the futures variety system”
After the implementation of the Futures and Derivatives Law, and with the implementation of policies related to the registration system for the listing of futures and options in the future, the listing of my country’s futures and options is expected to enter the “fast lane.” For the polyester industry circle, this is a positive signal: PX, bottle flakes, etc., which have been long awaited by industrial enterprises, are expected to join the futures “family” in the near future. The listing of these futures varieties will open a new chapter in the highquality development of futures tools in the entire polyester industry chain.
Corporate participation continues to increase
Cotton textile industry is my country’s advantageous industry, creating employment for tens of millions of people. A reporter from Futures Daily learned that in the past two years, short fiber futures and listed cotton, PTA, cotton yarn, B Diol futures, together with cotton and PTA options, have formed a relatively complete risk management tool system for the polyester and textile industries, better exerting the “agglomeration effect” in the field of cotton textiles and helping the industry accelerateTransformation and upgradingand high-quality development to further enhance international competitiveness and pricing power.
It is worth mentioning that in recent years, the risk management toolbox of the polyester industry has been continuously enriched. In 2006, PTA futures were listed and traded on the Zhengzhou Commercial Exchange. In 2018, ethylene glycol futures were listed and traded on the Dalian Commodity Exchange. Successfully introduced overseas traders, PTA options were listed in 2019, and short fiber futures were listed in 2020. “Such a ‘toolbox’ plays a positive role in polyester industry chain companies in arranging production plans, managing price fluctuation risks, stabilizing operations and locking in profits,” said Zhang Sixi, assistant to the president of Xinfengming Group.
Hengyi International Trade Research Director Wang Guangqian also believes that the listed polyester industry chain futures varieties basically cover polyester raw materials and some downstream products, and the exchange has better facilitated the industry chain by setting up arbitrage contracts for related varieties. Enterprise hedging can help enterprises lock in future production profits at a relatively high level of industrial profits, and better ensure the completion of annual profit targets and the stability of production and operations.
It is understood that at present, PTA production companies, which account for 96% of the total domestic production capacity, use futures hedging; short fiber production companies, which account for about 50% of the total domestic production capacity, use futures tools to hedge risks.
“Many polyester chain companies buy raw materials in far months through futures to reduce raw material procurement costs. At the same time, they sell corresponding finished products through futures, lock in processing fees in far months, and stabilize business operations. With the development of related option tools Since then, companies have become more and more proficient in using derivatives such as futures for risk management,” said Liu Siqi, an analyst at Zijin Tianfeng Futures.
There is a strong demand for raw material price risk management
Since the beginning of this year, the conflict between Russia and Ukraine has exacerbated global energy supply tensions and further increased inflationary pressure on economies such as Europe and the United States.
“The tight global energy supply has made the price fluctuations of upstream raw material products significantly greater than that of downstream products, making it difficult for polyester companies to effectively avoid risks in upstream raw material prices. In addition, amid weak global demand, corporate polyester product inventories have increased To historical highs, volume has increased and prices have fallen, and inventories are facing losses from falling prices,” Zhang Sixi said.
It is understood that the polyester industry follows a more “cost-led” logic, and changes in the upstream cost side have a greater impact on enterprises.
Wang Guangqian introduced that this year the polyester industry chain is facing a situation of “strong at the top and weak at the bottom” due to high energy raw material costs and sluggish terminal demand. However, since most products in the industry chain are priced based on cost, the prices of products in the entire industry chain basically follow the price of raw materials. The fluctuation is more obviously affected by the raw material end.
“From May to June this year, the shortage of gasoline in the United States led to extremely strong demand for aromatic oil blending. The United States imported a large amount of MX and PX products from South Korea and other Asian countries. The contract supply of oil blending and downstream PTA polyester products has caused PX prices to rise sharply following US gasoline prices.” Wang Guangqian said.
“Due to the Russia-Ukraine conflict triggering the logistics restructuring of the global oil market, the global trade pattern of the energy market has changed, the refined oil market has been periodically unbalanced, and the profits of aromatic hydrocarbon blending have improved significantly, resulting in a tight supply of chemical raw materials.” SDIC Pang Chunyan, chief analyst of Essence Futures Energy Chemicals, said that as a result, there has been a shortage of PX this year, and the operation of some domestic PTA devices has been affected.
For polyester companies, the sharp rise in PX and PTA prices has led to an increase in polyester input costs. However, downstream weaving terminal demand is sluggish, polyester prices have been unable to keep up with the increase in raw materials, and downstream weaving companies are afraid to replenish polyester inventory at high prices.
“The PTA raw materials of polyester companies are settled according to the average contract price of the month. The PTA price that rises every day becomes part of the raw material cost of polyester that month, and polyester production suffers serious losses.” Wang Guangqian said that at this time, polyester companies only It can convert some polyester product inventories into corresponding PTA raw material consumption, and sell hedging on PTA futures to prevent the risk of polyester product inventory depreciation caused by the later PTA price drop.
It is worth noting that usually production companies are a natural force for short hedging in the futures market. Due to the pressure of raw material costs, production companies are forced to change the way of hedging, while downstream processing companies are facing high inventory pressure caused by the weakening of the demand side. Market hedging has instead transformed into a short hedging force. According to Wei Yifan, director of Hengli Chemical Engineering College, this is also a new change in the polyester market in 2022, and companies participating in futures hedging need to change their trading thinking.
At present, with the growth of domestic supply, PX’s dependence on foreign countries has dropped significantly. However, my country does not have a matching say in pricing of PX, and domestic PTA factories also lack corresponding risk management tools, making raw material procurement difficult. As cost fluctuations increase, polyester industry chain companies have increasingly higher requirements for managing the risk of raw material price fluctuations.
In Zhang Sixi’s view, under the current macro situation at home and abroad, it is difficult for the existing risk management “toolbox” to completely hedge risks in the upstream and downstream of the industrial chain. “The futures varieties of the polyester industry chain are only PTA, ethylene glycol and staple fiber, which are still relatively small. Enterprises need more tools to deal with market fluctuations and instability.”
The industry is looking forward to the listing of PX and bottle flake futures
A reporter from Futures Daily learned that polyester industry chain companies have a very urgent need to further improve the futures and options variety system of the industry chain.
“The futures products of bottle flakes and filaments downstream of the industrial chain have not yet been launched, and the futures products of PX, the main raw material of PTA, are in progress. The launch of these new varieties in the future will start the high-quality development of the entire polyester industry chain using futures tools. A new chapter.” Zhang Sixi said.
It is understood that my country’s export of bottle flakes is relatively large, and related companies need more tools to manage market risks when trading in the international market. Pang Chunyan said that at present, bottle flake companies can only use two raw material futures tools, PTA and ethylene glycol, which are more for cost management. However, there is a lack of effective tools for product pre-sale orders and inventory management. “Domestic bottle flake companies are urgently needed. We hope that bottle chip futures will be launched.”
For polyester industry chain companies, the listing of PX and bottle flake futures can further improve the polyester industry chain futures variety system and provide more tools and trading options for relevant companies and market institutions.
In Zhang Sixi’s view, after PX futures are listed, the PX factory can increase its shipping channels. In addition to the original trade model, it can also conduct combined futures and cash operations and delivery. “The listing of PX futures will also help strengthen my country’s voice in pricing in the PX market. In the downward trend of PX prices, PX factories can manage the risk of inventory depreciation through hedging. For PTA factories, procurement channels can be increased, in addition to cash In addition to some contract goods, you can also complete PX procurement by buying in futures and participating in delivery, which increases the initiative of procurement, reduces costs and increases efficiency. In addition, it can also help PTA factories lock in PTA processing differences.”
“The listing of PX futures will change the passive situation of downstream companies. PTA production companies can use PX futures to better lock in raw material costs, or at the right time by buying PX futures and selling PTA futures to process PTA forward. Fees are locked in. Now, due to the low liquidity of PX paper goods on the SGX, in order to lock in the cost of PTA raw materials, PTA factories can only lock in the cost of PTA raw materials through upstream naphtha and other tools with better liquidity, but this does not directly use PX futures It is better to wait for tools to lock in the price of raw materials.” Wang Guangqian said.
At the “Polyester Industry Sub-forum” of the 2022 China (Zhengzhou) International Futures Forum, Yu Xuanfeng, deputy general manager of the Zhengzhou Commercial Exchange, once said that the Zhengzhou Commercial Exchange is strengthening the research and development of new varieties and working hard to promote the listing of PX and bottle chip futures to further Improve the product and tool system to better support the high-quality development of the polyester industry.
“We look forward to further improving the futures variety system of the polyester industry chain, enriching the risk management methods of polyester industry chain enterprises, and better ensuring the stable operation of polyester industry chain enterprises.” Wang Guangqian said.
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