PTA Futures Prices Fell At A Space Of 300 Yuan / Less.

Recently, thanks to the escalation of Sino US trade frictions, the market has worried about textile and clothing exports, and domestic textile raw materials are showing weakness.

In addition, the PTA market supply and demand structure weakened, 1909 contracts continued downward pressure, 24 days dragged down by the drop in crude oil, fell below the low of the beginning of the year, returned to 5300 yuan / ton below.

The commissioning of Hengli device has turned into a turning point, from PX to profits.

In May 17th, Hengli shares announced that its 20 million ton / year refining and chemical integration project was fully put into operation, and its 4 million 500 thousand tons / year PX capacity greatly increased the self-sufficiency rate of domestic PX, so that the PX high profit gradually shifted to the PTA link.

The price difference between PX and naphtha has narrowed to below the historical average in recent years as the PX plant has been put into operation.

In the second half of 2018, the PX- naphtha oil price difference was near $600 / ton, and PX production was lucrative. But in 2019, when China's massive PX new capacity was put into operation, the huge profits were facing a sharp compression, which became an important negative force in the PTA market.

In the middle of 5, the PX- naphtha oil price difference returned to below US $300 / ton. In theory, PX production turned to be a loss, and the willingness to reduce production of PX devices in Asia increased.

It is reported that the modern 800 thousand ton plant in South Korea will be overhauled at the end of May, but if the refinery profits continue to deteriorate, its 1 million 180 thousand ton installations may be reduced; the 1 million tons of Qingdao's Li Dong plant will be reduced by 40%; the Korean Lotte 750 thousand ton plant may reduce production at the end of June, increase production by OX; the S-OIL two device will stop until August; the TPPI aromatics 550 thousand ton plant will reduce output; 10-15% will be used for oil pfer, and the PX load will drop 30%; in addition, there are Formosa Plastics, Vietnam NIGH SON, Thailand TPX, OMPL and other devices for reducing production, stopping production or extending maintenance time.

We can see that PX has changed from profiteering to losses, and the enthusiasm for production of the enterprises has dropped significantly. In the short term, the oil price difference between PX- and naphtha is likely to gradually stabilize.

However, 4 million tons of Sinopec, 600 thousand tons of Sinopec, and 1 million tons of Hainan refining and chemical plant will be put into operation soon. The PX market is still facing the impact of increased supply. The price difference of PX- naphtha in the later period will continue to descend. The space will be within 100 US dollars / ton, compared with the level at the beginning of this year, the space has been relatively limited.

Trade frictions escalate, PTA supply and demand from tight to loose

Due to the centralized maintenance of the plant, the supply of PTA in April was tense. However, some of the plant maintenance plans failed to materialize in May. The expected shortage of supply in the month of PTA5 failed to materialize. In June, with the restart of the maintenance device and the commissioning of the Sichuan Shengda 1 million ton plant, the supply of PTA increased significantly. However, the downstream weaving pressure increased significantly, the sale of polyester was slow, the inventory remained high, the polyester load continued to decline, and the consumption of raw materials also declined synchronously.

Therefore, the supply and demand pattern of PTA is tight and loose, so prices are under pressure.

At present, the industry chain products are falling from bottom to top, the inventory of products has been depreciated, and the enthusiasm of enterprises has been suppressed, and negative feedback has been formed.

After the last round of PX prices fell rapidly, the PTA processing price difference showed a rocket rapid rush, followed by a rapid fall.

Due to the relatively centralized capacity of PTA and the difference from the perfectly competitive market, price changes not only follow the market rules completely, among which the leading enterprises have certain bargaining power.

In the first quarter of May, before the delivery of the contract, the market circulation inventory was low, the downstream polyester started high, the demand was strong, the PTA overhaul plan was also more, under the support of the fundamentals, although the cost PX price fell sharply, but the spot price was strong, so the processing price difference has enlarged greatly.

With the gradual weakening of the terminal textile and clothing market and the start of the fall, polyester production and marketing are blocked and inventory is accumulated. The processing profit of all links in the whole industry chain has been upside down for a while, and only PTA has taken the lead.

The intensification of Sino US trade situation has broken this situation.

Terminal demand has been cut again, polyester stock pressure is upstream.

The terminal grey cloth inventory is high, which restricts the terminal's purchase of polyester, and at the same time restricts the production and sale of polyester factory.

In 2019, China's textile and clothing exports fell in anticipation in 1-4 months, and exports of textiles and clothing were US $75 billion 764 million, down 3.69% from the same period last year. Of them, textile exports were US $36 billion 672 million, up 0.81% over the same period last year, and exports of garments and accessories were 39 billion 92 million US dollars, down 7.56% from the same period last year.

In RMB 1-4, China's textile and apparel exports totaled 515 billion 820 million yuan in 2019, up 1.56% from the same period last year, which is closely related to the significant depreciation of the RMB in April compared with the same period last year.

The 125th Canton Fair, which has just concluded, clinch a turnover of US $29 billion 730 million, down 1.16% from last spring's fair, which shows that exports remain under pressure in the context of slowing global economic and trade.

According to monthly data, China's textile and apparel exports in April were 19 billion 460 million US dollars, down 9.43% from the same period last year, the lowest monthly export volume since April in 2012.

Among them, textile exports amounted to 9 billion 789 million US dollars, down 6.90% compared with the same period last year, and clothing exports were 9 billion 671 million US dollars, down 11.85% compared with the same period last year.

From the data in April, we can see that the export trade of clothing and textiles is weakening.

Data in the first quarter may still be due to the existence of a false start.

In fact, the current category of tariffs imposed on China is not related to the bulk of clothing textiles.

The real blow came in the evening of May 10th. The USTR issued a statement on its official website saying that President Trump ordered that tariffs on the rest of the Chinese products be raised, amounting to about $325 billion, including almost all clothing and other textiles other than those already taxed.

If the remaining clothing and textiles are impeding exports to the US, then the blow to China's textile industry can not be underestimated.

In 2018, the export volume of clothing and textiles to the United States amounted to US $42 billion 200 million, accounting for 15.25% of the total export volume.

Asia, North America and Europe remain the top three in the textile and clothing export area, while North America ranks fourth.

But the United States remains the biggest market.

In 2018, the industrial added value of 37 thousand Textile Enterprises above designated size increased by 2.9% over the same period last year, slowing by 1.9 percentage points over the previous year.

The private refining and chemical integration project has entered the commissioning cycle, which includes a large number of PX and PTA new capacity.

The bottom up capacity expansion of polyester industry chain is based on the growth of terminal demand.

About 60% of the textile industry is related to people's living standard and population growth. The remaining consumption is related to infrastructure and real estate.

It is noteworthy that in 2000, the proportion of domestic and foreign textiles and clothing was only 6:4, while domestic demand in 2018 accounted for about 75%.

Although we still need to pay attention to it, in fact, the impact of exports on the industry has gradually weakened.

But in fact, from the domestic market, the same is not optimistic, with Shengze grey cloth inventory days data, the first quarter of this year, grey cloth inventory is still relatively low in recent years, but in late March, grey fabric inventory days continued to rebound, is now relatively high since 2013.

The stock days of polyester filament, staple fiber and chips began to rebound at the end of March or early April. Almost all varieties have reached the high level of stock days in recent years.

The rebound of PTA stock days data is basically the same as that of polyester stock days. If the terminal weaving fabric inventory continues to accumulate, it will surely create a greater pressure on storage of polyester and PTA stocks.

To sum up, the supply and demand side of PTA has become loose, and the worry of the escalation of Sino US trade frictions has made the mentality fragile.

But the advantage of PX has been fulfilled most, processing to the loss order PX enterprise production enthusiasm decline, may support the PX price in the short term, but the medium long line is likely to continue to increase the loss; the current PTA spot processing fee is more than 1400 yuan / ton, the loose supply and demand is difficult to continue to support the high processing fee level, so in the short term, the PTA fall space mainly comes from the compression of PTA processing fee.

However, the processing fee of the 1909 contract has reached 900 yuan / ton, and the space for further compression is limited. It may be within 300 yuan / less, which corresponds to the drop of PTA futures price.

But if crude oil unexpectedly falls sharply or the US continues to raise taxes on Chinese exports, the space may also be broken.

(source: DIC, bulk internal reference, futures daily)