Polyester Stocks Remain Low, And Enterprises Have High Operating Rates.

After hitting a new low of 5 in November, the PTA1501 contract price rose sharply, rising to 5944 yuan / ton as a result of the rumors of reduced production, followed by a drop of crude oil to 5400 yuan / ton line.

The author believes that at the present stage, the focus of attention in the PTA market is not only the cost of crude oil falling, but also the large-scale reduction in production of PTA factories, which will inevitably lead to the purchase of downstream polyester factories.

At the present stage, polyester has a higher operating rate and polyester stocks are still at a low level.

The decline in crude oil prices is rooted in the ease of supply.

Supply continues to increase, while demand growth is less than expected, and prices fall accordingly.

In particular, Libya's crude oil production began to rise after April, from 150 thousand barrels per day to 900 thousand barrels per day; Iran's participation in the six party talks also showed that the situation in the country had eased, and the production of Iran crude increased slightly, from 2 million 500 thousand barrels per day at the end of 2013 to 2 million 800 thousand barrels per day.

In addition, output in Iraq and Nigeria has also risen slightly.

At the same time, Saudi Arabia's output has not decreased.

As a result, OPEC's crude oil output in 9 and October has reached a high level since 2012.

Among non OPEC countries, crude oil production in the United States has increased the most.

In the early November, US crude oil output exceeded 9 million barrels per day.

Judging from the number of drilling and market expectations, the rapid growth of shale oil output in the United States can continue. In 2016, it may hit an important barrier of 10 million barrels per day.

Look at the demand side of crude oil.

In 2014, the global economic development was still uneven, and the European and Japanese economies continued to slump.

Affected by this, the global crude oil market realized demand growth only in China and the United States, and China's demand growth also included an increase in strategic reserve crude. Consumption in Europe and Japan declined year-on-year in 2014.

At this stage, there is still available storage capacity in the global crude oil market. However, when the supply is continuous, once there is enough storage on the shore and floating tanks, there will be no spare place for storage, only stop mining.

Under such circumstances, crude oil prices will fall below the production cost of 60 US dollars / barrel.

The drop in crude oil has lowered the price of naphtha and PX, resulting in a collapse in the cost of PTA.

However, from the perspective of PTA industry chain, the reduction and self rescue of PTA factories will have strong support for price formation.

There are two reasons for the massive reduction of PTA plant production: first, the digestion of larger social stocks.

Since the end of June, the stock of PTA has increased by nearly 600 thousand tons. In the middle of last 11 months, the PTA factory took the initiative to buy goods in the spot market, resulting in the majority of social stocks concentrated in the hands of PTA factories.

Moreover, the PTA factory also has some PX stocks, and the price of PX has dropped sharply, which has also led to a loss in this part of the inventory.

Second, if the PTA factory does not reduce production, the supply of PTA is bound to overrun again, and PTA production will also fall into losses. This is a recurring situation this year.

Moreover, December is a very profitable month for listed companies.

Based on these two reasons, in addition to foreign enterprises and state-owned enterprises, the domestic PTA plant is implementing a large-scale joint production reduction, resulting in PTA operating rate at some time points to a record low.

What does the reduction mean? No matter what the next price of crude oil and PX is, the good trend of downstream polyester will push up the continuous strong PTA price, and the reduction of production will lead to a larger gap between supply and demand of PTA.

Domestic PTA and polyester production capacity is 43 million 480 thousand tons and 44 million 390 thousand tons respectively. If polyester starts up at 80% in December and PTA starts at 60%, then social inventories will be reduced by 400 thousand tons in that month. If PTA starts at 55%, then PTA's social inventory will be reduced by 560 thousand tons; if the average monthly opening rate is kept below 55% or below, the accumulated social inventory in the second half of PTA will be exhausted.

In short,

The industrial chain has a pattern of upstream and downstream.

On the one hand, upstream crude oil and PX continue to be weak, and the cost support of PTA collapses.

On the other hand, PTA downstream polyester stocks remain low, high operating rate of enterprises, PTA supply will be substantially reduced due to reduced production.

Against this background, the 1501 contract will run strongly, while the 1505 contract trend may be more influenced by the cost side. Investors can make positive arbitrage of 1501 contracts and 1505 contracts.