Downstream resumption of work is slow, and PTA is shrouded in pessimism
Against the background of surging supply, the PTA market in 2020 was already extremely pessimistic. However, the COVID-19 epidemic that broke out at the beginning of this year swept across the country, dragging down downstream demand. PTA futures prices jumped sharply after the holidays. Although they have rebounded recently, due to the general delay in the resumption of work in terminal industries this year, the contradiction between PTA supply and demand has increased, and it is difficult to get out of the weak situation in the short term.
No support on the cost side
The outbreak of public health events has triggered market concerns about future oil demand. As crude oil prices have continued to decline, the PTA market has been bleak. Although futures prices have rebounded slightly recently, the market weakness has not been reversed.
In 2019, 8.33 million tons of new PX production capacity was added in China, with the production capacity growth rate as high as 57%. The substantial expansion of raw material production has increased the pressure on the polyester industry chain. The current domestic PX operating rate is around 78%. After the year, Zhejiang Petrochemical’s No. Two 2-million-ton PX devices have been started, and the overall supply of PX is expected to continue to increase in the future. With the release of new production capacity, PX processing fees have dropped again and again. Recently, the price difference between PX and naphtha has continued to be around US$250/ton. It is difficult for the profits of the PX industry to improve, and there is no support for the cost side of PTA.
Supply pressure increases
Since January 2020, new production capacity of Xinjiang Zhongtai Kunyu and Hengli Petrochemical No. 4 has been released one after another, bringing a cumulative increase of 3.7 million tons/year. Although some devices have recently been undergoing phased maintenance or load reduction, the production capacity loss in February was About 700,000 tons, but the overall operating rate of the PTA industry is still at a high level of about 82%. Compared with the low load in the downstream market, the pressure on the PTA supply side is more obvious.
The current raw material cost of PTA is about 3,860 yuan/ton, and the spot processing fee is only more than 400 yuan per ton. Based on this, it is estimated that the manufacturer is basically in a loss situation. The current inventory of PTA manufacturers is about 10 days, and the raw material reserves of polyester factories are also about 12 days. If the rework in the downstream market is not as expected in the later period, and the demand follow-up is insufficient, the PTA link will be forced to accelerate the inventory accumulation, and then the PTA processing fee will be compressed again. , thus more manufacturers will join the ranks of production cuts.
Demand is difficult to recover
The difficulty in resuming work caused by the epidemic has plagued the market. The further downstream the polyester industry chain is, the more sensitive it is to the epidemic. At present, the resumption of work of major weaving companies is mostly after mid-February, which is generally delayed. However, due to logistics restrictions and the 14-day quarantine period after workers return to work, it is optimistically estimated that weaving companies will not be able to return to normal until early March, and the production capacity of areas with severe epidemics will be Restored later.
The mismatch in the start-up of the polyester industry chain during the Spring Festival has already increased the inventory pressure on the upstream market, and this year’s epidemic factors will directly lead to a reduction in demand by about a month. With terminal construction delayed, the launch of new polyester production capacity this year will be greatly reduced.
It is understood that some polyester manufacturers have further reduced equipment production due to insufficient auxiliary materials. Up to now, the operating load of polyester has dropped below 60%. Even so, the inventory of various products is still increasing rapidly, and the accumulation of polyester inventory in the later period is still obvious, thus dragging down the digestion of PTA inventory.
In summary
Under the influence of the current epidemic, hard-core anti-epidemic policies are frequently issued in various places, and it is difficult to guarantee the time for terminal enterprises to resume work. At the same time, polyester factories are also continuing to reduce their load. In the later period, PTA will face greater pressure on accumulated inventory. Against the background of the intensifying contradiction between supply and demand, PTA is expected to still oscillate weakly and is not suitable to participate in the rebound.
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