PTA Production Capacity Will Face Great Pressure In The New Year

With the gradual recovery of market demand, the supply and demand margins will be improved in the later stage, but this year is the new year of PTA production capacity. PTA will be dominated by weak trend during the production cycle.

Affected by the outbreak of the new crown pneumonia, PTA fell after the first day of the Spring Festival, and then rebounded, but the strength of the rebound was limited. Since the Spring Festival, the terminal textile and garment industry is facing an impact under the background of a sharp drop in consumption. This article will analyze the potential trading opportunities of the late PTA from the dimension of fundamentals.

PX supply space is limited

In March 2019, with the production of qualified 2 million 250 thousand tons of PX plant in Hengli Petrochemical Company, the PX launch cycle was announced. Since then, the price of PX has been falling all the way, the processing fee has been reduced from 600 US dollars / ton to 300 US dollars / ton, and the old PX devices such as Japan and Korea have been plunged into losses. However, China's PX installations are still in order, and Hainan refinery, Hengyi Brunei, Zhejiang Petrochemical and other devices have been put into operation.

In the near future, the main contradiction of PX is not the supply side. Although the 4 million ton capacity of Zhejiang Petrochemical has been released, according to the information website, the capacity of Asian PX overhaul in the period from 2 to March is about 2 million 800 thousand tons, the increment of hedging new capacity and the limited supply of PX. However, the direct demand of PX is facing a negative risk of PTA. The main reason is that its profit and inventory pressure are relatively large. Therefore, the demand side of PX will have a weakening risk. It is expected that short-term PX will still show a low oscillation trend.

Processing fees are low in the past 3 years.

2020 will be a great year for PTA production capacity, excluding the 2 million 200 thousand tons of new Feng Ming production capacity that has been put into operation, 1 million 200 thousand tons of Sino Thai Chemical capacity and 2 million 500 thousand tons of Hengli Petrochemical's first phase production capacity. In the first half of this year, Hengli Petrochemical's two phase 2 million 500 thousand ton production capacity will also be put into operation. In the second half of the year, there will still be two tons of new Feng Ming's 2 million 200 thousand tons of capacity, 2 million 500 thousand tons of Honggang's petrochemical capacity, 3 million 300 thousand tons of Yisheng's capacity in Ningbo, and 2 million 400 thousand tons of Fujian's capacity. The annual capacity growth is as high as 30%, and the large volume of production will lead to the compression of profits. At present, the cost advantage of the new capacity is very obvious. It can achieve 300 to 350 yuan / ton, but the device on the market, especially those with capacity less than 1 million tons, cost up to 600 - 700 yuan / ton. In the capacity delivery cycle, small devices will gradually lose market share because of losses, and then withdraw from the market.

When we look at it, the processing cost of PTA spot is about 390 yuan / ton, the lowest level in nearly 3 years. Most of the devices have fallen into losses, resulting in an increase in device overhaul. At present, the effective load of PTA has dropped to 82%, which is 4 percentage points lower than that before the Spring Festival. In terms of inventory, PTA stock has climbed to a high level of more than 2 million 500 thousand tons in recent years. It is at the highest level in recent years, and due to limited transportation, the inventory is mostly concentrated in PTA plant, and the factory pressure is more obvious.

Polyester products face greater pressure

Under the influence of the epidemic, the biggest impact was the textile and garment industry. From the polyester operating rate, after the Spring Festival, polyester load rose rapidly to around 85%, but this year after the Spring Festival, the operating rate dropped to 60%, and it is difficult to effectively improve in the short term. In terms of inventory, after POY storage during the Spring Festival, polyester plant POY stock has climbed to 26.2 days, and the rest of the products have also increased significantly. At present, the polyester market is in a state of priceless market. Most pet factories have no quotations. Later, with the gradual recovery of logistics, the price of polyester products will face greater downward pressure.

Data show that as of February 27th, the opening rate of Jiangsu and Zhejiang weaving is about 20.5%, although it has picked up somewhat earlier than before, but it is still at a low level. The main reason is that most of the migrant workers have not been reworked and still need 14 days' isolation after reworking. On the other hand, enterprises need to re apply for work after reemployment, and they can resume work after approval. It is estimated from time that the downstream demand recovery time is fastest in early March.

On the whole, with the gradual recovery of market demand, the supply and demand margins will improve in the later stage. However, the recent global outbreak, crude oil prices have dropped sharply, and the support of PTA cost side has weakened. Later in the production capacity of the cycle, PTA price center of gravity or down, the processing fee interval will also move down. It is estimated that the PTA processing fee is expected to be in the range of 300 to 600 yuan / ton this year, and investors can refer to the PTA processing fee interval for futures operation.