Trade War: US 300 Billion Tariff List Threatens Polyester Raw Material Prices To Be Negatively Affected

In recent years, the Trump administration announced that tariffs on 200 billion US dollars in China's exports to the United States increased from 10% to 25%, causing a great stir in the polyester market. Crude oil and related polyester commodities fluctuated sharply around the news.

The most intense reaction is Zhengzhou's cotton futures market.

In May 13th, Zheng cotton opened for 12 minutes, that is, "limit down". In May 14th, "limit down" was reproduced. At present, Zheng cotton CF1909 stopped at 13820, which was 10% lower than the closing price of May 6th May in the first trading day 15315.

Compared to the ninth round of consultations, the closing price of 16120 in April 15th dropped by 14.3%.

14, the futures chemical sector again fell down collectively.

PTA1909 continued to plunge the day before yesterday, down 212 yuan / ton, or 3.67%, closing at 5560 yuan / ton.

MEG continued to explore the bottom line, the main contract hit the limit plate, and finally reported a decrease of 3.16% yuan to 4437 yuan / ton.

1, if the 300 billion new list is formally implemented, the export of textile products will be greatly affected.

We know that the futures market reflects more anticipation, and the pessimism of the industry is obvious.

On the whole, the decline of cotton and PTA and MEG in recent days is not only influenced by the macro risk aversion, but most importantly the market is worried about the downstream clothing varieties such as the target list of the subsequent tax increase.

As we all know, China is a big exporter of traditional textiles.

According to China Customs statistics, in 2017, China exported 258 billion 400 million US dollars of textiles and clothing, of which US $42 billion 500 million was exported to the United States, accounting for about 16.5% of China's total exports of textile products.

In 2018, China exported 276 billion 730 million of its textiles and clothing, of which US $45 billion 800 million was exported to the United States, accounting for about 16.6% of China's total exports of textile products.

It can be seen from the form that the total export value of these commodities in 2018 was US $8 billion 987 million, accounting for 19.6% of China's total exports of textiles and clothing in 2018, accounting for 3.25% of China's total exports of textiles and clothing in 2018.

(it is reported that in 2017 this part of the goods exported to the United States amounted to $4 billion).

From the data point of view, the current amount and proportion do not seem to be very large.

The main reason is that the $200 billion commodity does not include woven garments, knitted garments and household textile products with 61-64 tax numbers.

Woven garments, knitted garments and household textile products are the main commodities of China's export textile and clothing, which account for 75% of the total exports of Chinese textile and clothing.

However, the United States has announced that it will continue to levy tariffs on the remaining $300 billion of goods exported to China by the United States.

If some of these products are subject to tariffs, the impact on China's textile and clothing exports will be aggravated.

After all, the amount of textile and clothing exported to the United States accounts for 16.5% of the total exports of China's textile products.

According to the latest list released by the official website of the US, the remaining $300 billion includes almost 80% of China's textile exports to the US $about 40000000000.

Figure 1: cumulative value of export delivery of Chinese spun garments (Yi Meijin)

Source: wind; East China Sea Research Institute.

According to the General Administration of customs data, China's textile and apparel exports in 2018 amounted to US $276 billion 731 million, an increase of 3.52% over the same period last year.

Among them, exports of textiles amounted to US $119 billion 98 million, an increase of 8.12% over the same period last year, and exports of clothing and accessories reached US $157 billion 633 million, an increase of 0.29% over the same period last year.

RMB denominated in 2018, China's textile and apparel exports totaled 1 trillion and 826 billion 370 million yuan, a slight increase of 0.78%.

Under the influence of tariff and value-added tax reduction, the phenomenon of "grab export" exists, which indirectly pfers export pressure to the 2 quarter of 19.

For China's textile industry, exports to the United States account for 17%, so the US market is the first largest customer.

At the same time, the two countries have a huge surplus in textile traders.

According to the General Administration of customs data, in 2017, the total trade volume of textiles and clothing in China amounted to US $293 billion 150 million, of which US $268 billion 600 million was exported and US $24 billion 550 million was imported, with a total trade surplus of US $244 billion 50 million.

Figure 2:61 chapter exports to the United States knitted or crocheted garments and accessories (US $100 million)

Source: wind; East China Sea Research Institute.

Figure 3: 62 chapter exports to the United States non knitted or crocheted garments and accessories (US $100 million)

Source: wind; East China Sea Research Institute.

By observing the breakdown of export data, we can find that China has a strong seasonality for the export of American spun garments. According to the calculation of time, it will soon usher in the peak season.

According to statistics, in 2019 1-4, China's textile and clothing exports decreased by 4% compared with the same period last year. Due to the macro level influence of Sino US trade friction this year, the total export volume in the two quarter is expected to be callback, which has a negative effect on the textile and polyester industry.

2. Compared with MEG, PTA is relatively resilient.

As the main stream of polyester, PTA and MEG in the Sino US trade friction, the price is obvious, and then to varying degrees of negative impact.

Even though the current 300 billion dollar tax increase has not yet been implemented, the market panic mentality has been reflected on the disk.

Since Monday, Zheng cotton has fallen, and PTA and MEG's main contract also dived sharply, approaching the fall.

For the two varieties of PTA and MEG, we believe that although the downstream is polyester, the two fundamentals are different.

Compared with MEG, PTA may be more resistant in the later stage.

Back to the fundamentals, from top to bottom, crude oil has recently been affected by geopolitical factors such as geopolitics and so on. Oil prices are showing a trend of oscillation, and oil is hovering in the range of 70-75 US dollars / barrel.

The United States tightened its policy toward Iraq. By tracking Iran's output and export changes, the impact of previous sanctions on Iran's output is about 1 million barrels per day.

We expect the impact on exports to be about 600 thousand barrels per day.

In addition, Venezuela's political situation was also tense, which once triggered the market's speculation about the oil supply crisis.

Personally, it is believed that the tight balance between supply and demand has been achieved by the reduction of OPEC production. The supply of the Middle East countries is the most unstable factor. As of feeds, another news shows that the United Arab Emirates port oil tanker is on fire and has much interest in oil prices.

Since the current price of oil has not broken through the previous high (80-85 US dollars / barrel), in other words, there is still a certain distance from Saudi Arabia's high oil price target set up for Saudi Amy's listing, so the June OPEC conference will probably continue to cut production. We are still cautiously optimistic about oil prices in the next two months.

In addition, pay attention to PTA and MEG's own industrial chain.

Due to the successful implementation of the supply side reform, the capacity optimization and relative concentration of PTA industry can be said to be in a relatively healthy state.

From the point of view of processing fees, the TA spot processing fee has been maintained at 1800-2000 yuan / ton level in the past two weeks. In addition, at the beginning of 19 years, with the PX plant gradually being put into production, the upstream profit can be pferred smoothly.

The current PX- naphtha spreads have been hovering at the low level of 320 US dollars / ton, which is difficult to fall deeply, and together with crude oil, there is certain support for PX prices.

In addition, the futures market is in the state of deep discount, and the intent of the big factory is very clear. Therefore, the current negative expectation of the price may be concentrated on the demand side.

Polyester has started to decline, and production and marketing have not been much improved.

On the MEG side, although production is still close to losing money, the seasonal overhaul soon comes, and the load falls obviously. However, the port stock is still at a high level, and is affected by the lack of downstream demand.

To sum up, the risk disturbance caused by the recent trade friction can not be ignored. In particular, the late 300 billion US dollar commodities contain most of the textile related products exported to the US, so we need to focus on the progress of the negotiations between the two countries.

At the macro level, there is much news, and the impact on PTA and MEG is short in the short term.

(source: Lujiazui forum, China yarn net)