G20 Summit: Arbitrage Funds Into The PTA Futures Market

In 2016, the first year of crude oil supply and demand rebalancing, the contraction of supply side accelerated the change of supply and demand pattern, and the crude oil trend in the first half of 2016 also reflected market expectations.

International crude oil rebounded to $50 / barrel in mid year, but the crude oil market is still facing heavy pressure.

First, the pressure on international crude oil inventories is huge. The US crude oil inventories have been in a rapid accumulation in the first half of the year. As of the end of June, the US crude oil inventories have accumulated to 526 million 570 thousand barrels, and excessive inventory will suppress the continued rise of crude oil.

Secondly, the impact of the Canadian fire and the easing of the situation in Libya, the factors affecting crude oil supply in the first half of the year are fading away, and the supply of crude oil will resume. The crude oil intermediate price in the second half of the year is expected to be around 50 dollars / barrel.

In the first half of the year, the price of PTA futures continued to rise, and the current arbitrage window opened. A large number of current arbitrage funds poured into the PTA futures market, and PTA warehouse receipts increased rapidly.

By May, the total volume of PTA warehouse receipts increased to 186 thousand at the time of contract delivery, totaling 930 thousand and 300 tons of PTA spot, higher than the same period in history, and the accumulation of inventory and warehouse receipts also suppressed PTA rebound.

1605 after the delivery of the contract, the PTA warehouse receipts increased again after a brief decrease. By the beginning of July, the PTA warehouse position had exceeded the May high and reached a record high.

G20 summit involves the impact of PTA plant capacity of about 11 million 190 thousand tons, when the PTA utilization rate is expected to decline to about 45%, the supply side contraction will have a greater impact on the entire industry chain.

Downstream polyester factory, involving polyester production capacity of 18 million 510 thousand tons, comparing PTA and polyester production stop, polyester production is more involved in discontinued production, so in fact, G20 summit is more negative impact on PTA.

In 2016, geopolitical and sudden interruption of crude oil supply also accelerated the rebalance of international crude oil supply and demand.

In early May 2016, a forest fire broke out in the famous oil city of Alberta, western Canada (Alberta). The fire destroyed or destroyed more than 1600 facilities in the city of FortMcMurray.

Almost all of Canada's crude oil reserves are in Alberta, of which 97% are oil sands.

In May, Canada's crude oil output fell to 2 million 750 thousand barrels per day, down 22.1%, down 13% from the same period last year.

A series of attacks by the Niger delta Avenger on Nigeria's oil infrastructure in May 2016 resulted in the interruption of crude oil exports. In May, the output of crude oil in Nigeria dropped to 1 million 240 thousand barrels per day, down 19.3% from a year earlier, down 18.1% from the same period last year.

Meanwhile, the conflict between rival factions in the eastern and western parts of Libya also reduced the supply of crude oil. In May, Libya crude oil output dropped to 320 thousand barrels / day, a 16.1% decline in the central age, down 29.3% from the same period last year.

In 2016, the first year of crude oil supply and demand rebalancing, the contraction of supply side accelerated the change of supply and demand pattern, and the crude oil trend in the first half of 2016 also reflected market expectations.

International crude oil rebounded to $50 / barrel in mid year, but the crude oil market is still facing heavy pressure.

First, the pressure on international crude oil inventories is huge. The US crude oil inventories have been in a rapid accumulation in the first half of the year. As of the end of June, the US crude oil inventories have accumulated to 526 million 570 thousand barrels, and excessive inventory will suppress the continued rise of crude oil.

Secondly, the impact of the Canadian fire and the easing of the situation in Libya, the factors affecting crude oil supply in the first half of the year are fading away, and the supply of crude oil will resume. The crude oil intermediate price in the second half of the year is expected to be around 50 dollars / barrel.

The author analyzed the correlation between Brent crude oil and PTA in the first half of 2016, and found that the correlation coefficient between them is as high as 0.67, which indicates that the change of crude oil price has a great impact on the price change of PTA.

In 2011 and 2012, the PTA production capacity was put into a high tide. The rapid growth of production capacity caused the PTA industry to enter the era of overcapacity. In 2012, PTA entered the perennial deficit pattern.

In 2014, the new capacity of PTA increased to 10 million 420 thousand tons. In 2015, the new capacity of PTA was 3 million 580 thousand tons, and the problem of excess capacity of PTA was becoming more and more serious.

In March 2016, the two phase 2 million 200 thousand tons of Hon Bang petrochemical company started to drive, and the total capacity of China's PTA reached about 49 million 90 thousand tons.

After the two phase of the Hon Bang petrochemical operation, it is predicted that the PTA launch cycle will end from 2012 to 2016. In the next few years, no new PTA capacity will be put into operation, and PTA will enter the stock game stage.

While the production capacity is slowing down, the curtain of capacity withdrawal has also been formally raised.

Some PTA

Due to operating costs, such as Yangzi Petrochemical line 1, Yisheng Ningbo line 2, Zhuhai BP1 line, Ji'nan Zheng Hao, Peng Wei petrochemical and Liaoyang petrochemical and so on.

Some of them are bankrupt due to their serious insolvency and unable to repay their due debts, such as the Far East Petrochemical Company, which was bankrupt in 2015.

There are also accidents caused by device damage, waiting for mergers and acquisitions, such as the 2015 explosion or accident of Tenglong aromatics and Xiang Lu petrochemical.

Although the total capacity of the PTA is as high as 49 million 90 thousand tons, there are more PTA installations for long term parking due to bankruptcy, accidents and losses. The total capacity is up to 12 million 735 thousand tons, and the actual effective capacity of PTA is only 36 million 355 thousand tons.

Xiang Lu petrochemical or restart in the second half of the year, PTA supply side is still not optimistic.

In the first half of 2016, several sets of PTA devices were overhauled, and the PTA load was suppressed below 7. However, the PTA cash flow was still negative for most of the first half of the year, indicating that the loss of PTA industry was not improved.

At the end of 14 benefited from the sharp rise in PTA spot price, PTA processing profit increased rapidly, reaching 200 yuan / ton (processing fee was calculated at 600 yuan / ton), and hit a new high in one and a half years.

However, with the rapid drop in spot prices, PTA processing profits fell rapidly, with an average loss of around 200 yuan / ton.

The low processing fees of PTA did not lead to large-scale device parking. On the one hand, we should seize the share, and on the other hand, compete for competition.

The PTA industry has a difficult road to production capacity, but objectively speaking, low processing costs also limit the fall of PTA.

From September 4, 2016 to 5, G20 will be held in Hangzhou, Zhejiang. In order to ensure the air quality during the summit, Zhejiang issued the environmental protection plan to create "West Lake blue" action, and divided the polluting enterprises in the area according to their geographical and hierarchical levels, taking protective measures such as stopping production and limiting production.

The release of the production stop documents requires the core area, the strict control zone and the control area in the period from August 26, 2016 to September 6th, taking the home court as the center, 50 yuan strategy, 100 kilometers and 300 kilometers respectively.

The core area and the strict control area only involve Hangzhou, Ningbo, Huzhou, Jiaxing, Shaoxing, Jinhua and Quzhou. The control area mainly deals with Wenzhou, Zhoushan, Taizhou and Taizhou.

According to the information, the G20 summit will affect the PTA plant's capacity of about 11 million 190 thousand tons, and the PTA utilization rate is expected to drop to about 45%. The supply side contraction will have a greater impact on the whole industry chain.

Not only near Hangzhou

There are many factories, and polyester factories and textile factories are also numerous.

Therefore, the G20 summit has also had a great impact on the downstream production of PTA.

From the downstream polyester factory, it involves polyester production capacity of 18 million 510 thousand tons, comparing PTA and polyester production stop, polyester production is more involved in the production, so in fact, G20 summit has more negative impact on PTA.

In addition, although the polyester load decreased during the G20 summit, the demand for PTA will decline. However, the production schedule of polyester factories will be concentrated in 6-7 months, and the demand will be released in advance in September. Therefore, polyester enterprises will maintain production in the off-season to make up for the loss of output before the peak season, and the operating rate of polyesters is higher than that of the previous two years.

Upstream: crude oil demand increased significantly in the first half of 2016.

Close to equilibrium, international crude oil bottomed out and went out of the bottom.

But the power to push crude oil up is gradually exhausted. The core contradiction of oversupply of crude oil has not been solved. The output of OEPC oil has reached new heights. The rise in oil prices has led to a gradual increase in shale oil production activities and high global crude oil stocks. These are all overshadowing the rise in crude oil, and the crude oil intermediate price in the second half of the year is expected to be around 50 US dollars / barrel.

Supply side: PTA capacity slow down, affected by continuous losses, some small devices have long been parking, but PTA supply pressure is still very high. By the end of June, PTA warehouse receipts (registered warehouse receipts + effective forecasts) were as high as 181475, exceeding 900 thousand tons, and are still growing. In September, the cancellation of warehouse receipts will impact the spot market.

The G20 summit will affect the PTA plant's capacity of about 11 million 190 thousand tons, and the PTA utilization rate is expected to drop to around 45% at that time, and the supply of PTA will shrink.

In addition, the long-term parking devices such as Xiang Lu petrochemical or restart in the second half of the year, PTA supply side is still not optimistic.

Demand side: the G20 summit involves polyester production capacity of 18 million 510 thousand tons, and polyester shutdowns involve more capacity than PTA, so G20 summit actually has more negative impact on PTA.

In addition, although the polyester load decreased during the G20 summit, the demand for PTA will decline. However, the production schedule of polyester factories will be concentrated in 6-7 months, and the demand will be released in advance in September.

Overall, the focus of international crude oil prices will not be lifted in the second half of the year, and the cost side support of PTA will be limited.

The current PTA huge warehouse receipts are difficult to resolve, G20 summit has a partial negative impact on PTA supply and demand, PTA supply and demand pattern is difficult to change.

Therefore, in the second half of the year, PTA is still the main shock and the price range is between 4500-5200 yuan / ton.

In the three quarter, the 09 contract could consider taking the strategy of short selling. If 01 contracts fell to 4500, they could focus on making more opportunities.