The Impact Of The New PX Device On Polyester Market: PX Fell Sharply, PTA Faces Cost Collapse

As we all know, in the first half of 2019, PTA's tight supply and demand is a big probability event.

Because in addition to crude oil, more directly is the PX price, before due to tight supply and demand and more maintenance in spring, PX price has been relatively strong, for a period of time has become the main thrust of polyester raw materials.

Next, the PX industry will undergo landmark changes. A large number of new capacity will be added to the industry, which will have a huge impact on the supply and demand pattern of the industry and downstream polyester raw materials.

Sudden drop: from Hengli PX, Sichuan Shengda 1 million tons PTA put into operation the expected impact.

After entering 2019, PTA is still a relatively clear variety of logic.

At the beginning of the new year, crude oil prices rebounded and PX was very high, pushing PTA up.

But before the Spring Festival, the weaving factory exceeded the expected raw materials to replenishment, resulting in the decline of polyester filament inventory to a new low level, and the acceleration period price rose, but a great degree of overdraft was expected after the holiday.

On the return of the Chinese new year, polyester increased load on schedule, but enough weaving and preparation resulted in the demand side not having a good margin to pmit upstream.

The market focus has shifted to the supply side. Due to the relatively high concentration of domestic PX and PTA, the main logic of the supply and demand game is PTA/PX device maintenance and future delivery arrangements.

First of all, Fuhai set up 4 million 500 thousand tons of equipment load increased to 8, the supply pressure period price fell sharply in February 13th.

However, in March 5th, Jiangyin Hon BANG 2 million 200 thousand tons / year installation and Ningbo 700 thousand million tons / year PTA device temporarily stopped due to the failure of the theater and supplied a tense atmosphere.

At present, the two sets of devices have been restarted, but the balance sheet is not expected to change in March.

According to the maintenance schedule, there are still a number of large installations to be inspected in late March, such as Hengli 3#220 million tons and Tong Kun Jiaxing 2 million 200 thousand tons.

In addition, some market participants believe that the supply of PTA will continue to be tight in the first half of the year, on the grounds that Fuhai's 4 million 500 thousand tons PTA device postponed the restart of its PX part and overhaul in May, resulting in a substantial shrinkage of PTA supply.

Of course, if additional capacity is put into operation, part of the supply pressure will be eased.

At present, the market is most concerned about the commissioning schedule of the Hengli 2 million ton PX plant. It has a planned trial run at the end of 3 in line with the Sichuan Shengda 1 million ton PTA plant.

If these two sets of PX-PTA installations are successfully put into operation on schedule, they will quickly break the existing supply and demand pattern.

And the market began to worry about the commissioning of Hengli petrochemical PX plant recently.

The recent rumors of Hengli refining and petrochemical industry are not disturbing to the market. According to industry analysts, the international experience shows that it will take some time for the device to run smoothly to PX mass production.

However, from the recent news, the market can not underestimate the speed of Hengli.

It is rumoured that the 2 million 170 thousand ton / year PX device of Hengli refinery will be trial run in March 20th, which will lead to divergence in whether the price of PX can maintain its strength and short-term market sentiment.

What is the volume of constant force 2 million 170 thousand ton / year PX plant?

In recent years, the production capacity of para xylene in the world has increased steadily. The new capacity comes mainly from mainland China, Vietnam, India, and South Asia and the Middle East Saudi Arabia.

In 2012, world para xylene production capacity was 37 million 694 thousand tons, and by the end of October 2018, global capacity has increased to 52 million 333 thousand tons.

Among them, China is currently the world's largest production of p-xylene, the capacity of China's mainland is 13 million 930 thousand tons / year, accounting for about 26.62% of the world's total capacity.

The supply of PX in Asia will gradually overrun with the expansion of its capacity, because two large-scale PX production plants will be put into operation this year, namely, the 4 million 500 thousand tons / year PX new equipment of Hengli Group and the 4 million tons / year PX installation of Zhejiang Petrochemical Industries Co.

And the 2 million 170 thousand ton / year PX plant that Hengli will now open will account for 16% of China's capacity.

In the past two years, PX demand has been supported by the strong growth of PTA and polyester Market in lower reaches of China.

In the past two years, the growth rate of China's PX demand is in two digits. The growth rate of China's market demand is calculated by 10%, which means that 2 million 500 thousand ~300 million tons / year PX new capacity will be needed.

However, in the macroeconomic downturn, China's PX demand in 2019 is unlikely to have another two digit growth.

Once Hengli and other new PX capacity is fully operational, there will be an oversupply of PX in Asia in the near future.

At the same time, the construction and expansion projects of PX in China reached about 18 in 2019~2021. The new capacity of the system was 30 million 700 thousand tons / year, mainly including Dalian Hengli refinery 4 million 500 thousand tons / year, Zhejiang Petrochemical (phase I) 4 million tons / year, Sheng Hong Refining 2 million 800 thousand tons / year, Ningbo Sinopec Petrochemical 1 million 600 thousand ton / year and so on.

IHS Markit predicts that global PX production capacity will increase by 4 million 400 thousand tons / year in 2019, far exceeding the expected 1 million 800 thousand tons / year.

In 2020, the imbalance between supply and demand will further expand. In the same year, new capacity of 7 million 400 thousand tons / year is expected to increase, and the new demand is only 1 million 900 thousand tons / year.

The supply of PX will gradually increase with the expansion of PX capacity, especially in Asia.

It is foreseeable that such a large number of intensive production will bring huge pressure to supply to the market. The new capacity is larger than the net domestic demand of the same period. PX supply will soon go from shortage to excess.

As the supply pattern changes, imports will continue to decrease, and competition with foreign products will gradually evolve into competition among domestic products.

How big is the new PX device opening to the polyester market?

In 2019, if the PX installation of Hengli refinery and Zhejiang petrochemical plant was opened, Asian PX would gradually enter the excess stage ahead of PTA. Due to the current two quarter PX maintenance expectations and other factors, the higher processing fee of PX will no longer exist. Under the stable background of crude oil, the absolute price of PX will also drop sharply, and the cost support of PTA will be affected.

At present, in many industry insiders, the divergence between PX and demand side of PTA market is becoming the core logic in the short term.

In the view of industry analysts, Hengli's new capacity of PX can be successfully put into operation and its impact on the market is mostly concerned.

If PX weakens, the profit margin will shift to the PTA link, which is full of uncertainty about the absolute price of PTA.

"At present, it is relatively determined that the PTA processing fee will expand, that is, the absolute price of PTA will weaken at a slower speed than that of PX."

"With international experience, it will take some time for the device to be stable and stable to PX mass production.

However, from the recent news, the market can not underestimate the speed of Hengli.

It is possible to break the international record at the fastest speed and achieve mass production on time. There are also some uncertainties in this regard.

At the same time, coupled with the recently identified value added tax reduction in April 1st, it is also a catalyst for market adjustment.

Yide futures Zheng Po Fei said.

In his view, TA1905 contracts will face re valuation.

"If Hengli drives the mass production smoothly, the price of PX will be repaired downwards, while PTA will face a cost collapse. There will be some risks in the short run."

Zheng Youfei said that if Hengli realized mass production by May, the current 5 to September price differentials will also be downwards repaired.

As a whole, the contract of the near end is greatly influenced by the cost side, while the logic of the remote TA2001 contract is relatively determined. Whether it is the cost side or the self supply side, it will be relatively stable when the short term is short.