2019 PX Capacity Surge, Profit Decline, 2020 PX Profit Forecast

In 2019, the PX market went through the intensive operation of large refining and chemical industry, and the burst of capacity burst. Long Zhong information test data show that in 2019, the total capacity of domestic PX increased to 8 million 330 thousand tons, the highest point in PXN was 615.875 US dollars / ton, the lowest point was 222.455 US dollars / ton. The most notable focus of PX in 2019 is the steep drop in profits caused by sharp increase in capacity. At present, the operators are more concerned about the future market profit change trend.

First, look back on the past.

First of all, let's take a look at the change of PX and naphtha spreads over the past years. As the industry is at a critical point of US $300, we mainly consider the main reasons for the market change when PXN is below US $300 / ton. As can be seen from the figure, in the past 10 years, PXN has dropped three times for 300 US dollars / ton, 2009-2010 years, Kuwait aromatics company 820 thousand tons / year, CNOOC Huizhou 840 thousand tons / year and other new installations put into operation. In 2009-2010 years, PX has a total capacity of 4 million tons of new capacity. PXN price is less than 300 dollars / ton for half a year, and part of the time is close to 200 U.S. dollars / ton. In the 2013-2015 year, PX capacity explode growth. According to long Zhong statistics, during this period, the total PX capacity of the world increased by about 10 million tons, and PXN for half a year fell to 250 dollars / ton. Some manufacturers began to cut production, especially the short process factories, and the PX operating rate dropped from 84% in 2012 to 76% in 2015. Until the bankruptcy of Jurong aromatics in Singapore, the aromatics explosion of Tenglong stopped in April 2015, and the new capacity of PTA superimposed on the same year was also more, so the PX market was restored to the balance of supply and demand. In the past 2013-2015 years, a large number of PX installations have been put into operation, resulting in PXN obviously lower than the level of the previous 5 years. In 2019, the new capacity of PX increased, and PXN fell to below US $300 / ton. Let's carefully analyze the trend of PXN change in 2019.

Two, looking forward to the present

In 2019, there were two stages of PXN running under 300 US dollars / ton, namely: 22 months on May 16, 2019 -5, PXN fell to a low value of 279.875 US dollars / ton; after September 10, 2019, PXN was below 300 US dollars / ton for a long time, with a minimum value of 222.455 US dollars / ton.

Beginning in March 7, 2019, Hengli petrochemical equipment news continued to impact the market. PX prices ran counter to the cost side. Prices fell all the way, and the PX- naphtha oil price difference dropped to $279.875 / ton in May 20th. The collapse of the industry mentality was coincided with the Taiwan conference, and buyers continued to be absent. At the same time, as MX prices remain high for a long time, some businesses plan to reduce production by PX, thereby exporting raw materials. The specific reduction in production is the reduction of load in Qingdao's Li Dong plant, as well as the unexpected supply and maintenance of the Xincheng industrial and Munger Carol PX installations in India, and the tight supply of PX market. The downward trend of PX and naphtha spreads has finally been contained. Long Zhong statistics, India area in 4-6 months, due to lack of water, maintenance time extension, temporary maintenance and other factors, the number of accidental loss of PX is huge. It is the main reason leading to the obvious reduction in the number of imports to the domestic market. It is also the most important reason for the tight supply in the global PX market in early 5-7. It is estimated that the India plant's accident reduction (excluding the loss of Prudential industry's normal maintenance) and the PX loss amount to about 340 thousand tons. It can be seen that this PXN reduced, for the Hengli petrochemical plant impact, and the duration is too short, the reason for the reduction of Qingdao Li Dong and India manufacturers made PXN rise.

Saudi oil field in September 16th after the attack, began purchasing naphtha, superimposed Hengli continuously purchase Shandong naphtha, and after the explosion of the platform, the naphtha began to pick up, while the demand increased and the price of liquefied petroleum gas replaced high, making the naphtha cracking price difference continued to rise after mid September, naphtha increased considerably; terminal polyester off-season was about to hit, superimposed after August, Zhonghua Hongrun, Hainan refining and petrochemical, Liaoyang petrochemical and so on added a total of 1 million 830 thousand tons of PX capacity. Zhejiang petrochemical and Hengyi Brunei plant will soon be put into operation. The negative factors will dominate and the industry will lose confidence in the market prospect. Therefore, the difference between PX and Shek Nao oil price has dropped to below US $300 / tonne since September 2019. Because of the negative factors, the lowest value of PXN fell to 222.455 US dollars / ton, the lowest point in the year.

Summing up the past, we concluded that the main reason for the decrease in PXN was the release of new capacity, while the PX project's commissioning period was near 5 years, which coincided with the frequency of PXN decline. According to statistics, in the past ten years, the minimum value of PXN was 23 days in July 8, 2010 -7, with a range of 203-220 US dollars / ton, and 27-29 days in November 2019, with a range of US $222.455-223.875 / ton. We can conclude that when PXN falls to 220, it will rebound rapidly, so it can be predicted that PXN $220 / ton is the lowest value acceptable to enterprises since the beginning of history. Including December 15th, Fuhai creates a two line shutdown, which is also verified by this hypothesis.

Three, enjoy the future.

In 2020, PX added a total of 5 million 680 thousand tons of new capacity. But what we have to consider is that the new 8 million 330 thousand tons capacity in 2019 will be fully produced in 2020. So if we describe the PX market in 2019 with a dismal view, then 2020 should be described as horrible. But in 2020, PXN fell below $220 / ton, which is also more difficult. Next, let's take a look at the specific profit changes of PX during the restructuring and Aromatics Complex.

The cost structure of the aromatics combination mentioned above is shown. The cost of raw naphtha feedstock (naphtha procurement cost minus by-product gains).

As can be seen from the above chart, in early March, with the commissioning of the constant force device, PX profits continued to decline, and dropped to the lowest point in May 20th. After 100 yuan / ton, the follow-up profits recovered slightly, and the overall shock was below 500 yuan / ton.

Long Chung believes that due to fierce competition in the market in 2020, the integration of small devices and short process devices will be phased out, and the profits of enterprises will be further reduced. Initially, the price difference between PX and naphtha will be around $220 / ton.