After The Era Of Excess Capacity Opens Up Industry Gaming Intensified

After the pformation from the planned economy to the market economy, the domestic economy ushered in the rapid development.

At the same time, the demand for raw materials in the market has increased substantially. However, the capacity of chemical products can not be self-sufficient and requires large quantities of imports.

Before 2000, the import dependence of chemical products remained high, especially in the chemical fiber industry. In the last century 90s, the domestic economy was dominated by raw material production and primary processing industry, and the garment processing industry was an important part of it.

Since 2000, with the deepening of market economy reform, large-scale production and construction of bulk commodities have been completed, and the capacity shortage of PTA has gradually improved.

Due to the admission of 4 trillion capital investment, the domestic chemical production capacity has increased rapidly, and the PTA capacity is no exception. The capacity growth rate in 2011 to 2014 is 31.11%, 56.83%, 4.69% and 31.62% respectively.

In 2013, the growth rate of production capacity was relatively small, mainly due to the sharp fall in PTA prices, which led to concerns about the industry and delayed the commissioning of the plant.

According to incomplete statistics, as of 2015, the total capacity of domestic PTA reached 50 million 150 thousand tons / year, an increase of 34 million 850 thousand tons / year compared with 2010, an increase of 227.78%.

In fact, excess capacity is relative to demand.

If demand can maintain rapid growth, there will be no excess capacity. Even when demand growth is greater than capacity growth, there will be a shortage of demand.

However, the US subprime mortgage crisis in 2008 caused a global economic recession, and its impact still exists.

The euro zone and the United States are important destinations for domestic clothing exports, and the growth of garment imports in these regions has slowed down due to the setbacks in European and American economies.

In addition, due to the slowdown in domestic economic growth, coupled with the improvement of people's living quality, the demand elasticity of clothing income has been declining, and clothing demand has also been stagflated.

At the same time, the cost of labor is rising and the cost of garment processing industry is increasing. Foreign garment processing enterprises begin to pfer to Southeast Asia where labor costs are low.

Under the combined effect of these factors, the growth of domestic clothing demand declined, which indirectly led to a decline in market demand for PTA, resulting in imbalance between supply and demand in the PTA market.

Overinvestment in the PTA industry is earlier than that in other industries.

Backward production capacity is also earlier than other industries.

First, in the first half of 2015, due to insolvency, the Far East Petrochemical Company, which has fifth capacity in the PTA industry, went bankrupt, and its subordinate 3 million 200 thousand tons / year capacity has been shut down.

Considering that the equipment of the Far East Petrochemical Company is old and the products are not competitive in the industry, the probability that the fund will acquire its capacity in the short term is relatively small.

For this reason, the capacity of the Far East petrochemical company can be temporarily excluded from the total capacity of PTA.

Second, Sinopec will buy the third largest PTA producer, Xiang Lu petrochemical, which is already in progress and is expected to come out in the first half of the year.

If Sinopec makes a successful acquisition of Xiang Lu petrochemical, Sinopec's PTA capacity will reach 9 million 510 thousand tons / year, becoming the second largest PTA producer in China.

In 2015, the average load of the PTA industry in China was 66.40%, down 3.43% from 2014, or 4.91%.

Due to the rapid expansion of capacity, and the demand has not been followed up synchronously, the load of PTA industry has continued to decline.

Judging from the situation in 2015, once the price is too low, the PTA production enterprises will push up the price by means of limited production and insured price, so the starting load of the industry is the key factor to be paid attention to.

I believe that in the first half of the year, the load of PTA industry will be relatively stable, and the specific operation will be determined by the profit level of the production enterprises.

In 2015, the PTA inventory of PTA production enterprises and downstream polyester enterprises were at a low level and maintained for 4 days as a whole.

The PTA price is low, and the enterprises are unwilling to stock up too much after taking a short look at the stock market.

The result of poor stocking willingness of downstream enterprises is that the peak season is not prosperous.

No longer obvious.

The fifth largest enterprises in the industry withdrew from the market, and no capacity was received in a short time. The third largest manufacturers were bought by the fourth largest manufacturers, and the capacity concentration of the PTA industry rose sharply.

In the process of eliminating backward production capacity in the PTA industry, mergers and acquisitions have not only eased the problem of overcapacity in the industry, but also integrated the strength of the industry to make the pricing power of large PTA enterprises stronger.

On the PTA supply side, in 2016, the PTA plan was put into operation only in Jiangyin HB 2 million 200 thousand tons / year and Sichuan Shengda 1 million tons / year device, compared with the 50 million 150 thousand ton capacity in 2015, the growth rate was only 6.82%, lower than that of 8.30% in 2015, and the growth rate was below 10% in two consecutive years.

The peak period of PTA capacity growth is over.

In summary,

The peak of production has passed, and the integration of industries has begun, which means that the possibility of deterioration of the PTA supply side is no longer high.

In addition, crude oil prices fell to more than 70% from 110 US dollars / barrel to 30 US dollars / barrel. Taking into account the serious deterioration of the economic situation of the major oil producing countries, the space for oil price decline has been compressed.

Based on the above reasons, I believe that the possibility of PTA price drop is very small.

However, once the PTA price rebounded sharply, the load of the industry is bound to rise. Therefore, before the recovery of industry supply and demand relations, the PTA price does not have the reverse condition. It is expected that the first half of the year will oscillate at a low level, and the operating interval will be between 4000 yuan and 5000 yuan per ton.