Half of 2021 has passed so far. In this half year, the polyester industry chain has experienced a transition from stronger demand expectations, price realization expectations, to actual demand falling short of expectations. Recently, the industry’s demand for the second half of the year has been relatively clear. Positive outlook. At the same time, the gradual overcapacity is a commonplace topic in the polyester industry. The polyester industry chain has accelerated the pace of production since 2020, which has also caused the entire industry to shift from a tight balance in the early stage to excess. Under the contradiction between the positive expectations of demand and the rapid deployment of production capacity, how will the price of the polyester industry chain evolve in the future? What are the commonalities and differences between different products in the polyester industry chain? This article will focus on the commonalities and characteristics in the market interpretation of the polyester industry chain, and use this to forecast the polyester market in the second half of the year.
Common market trends
1. Demand is expected to be strong after the year, and costs will rise significantly
After the impact of the epidemic in 2020, the domestic and foreign textile and clothing industries encountered a cold winter. With the first improvement of the domestic epidemic situation and the promotion of foreign vaccines, domestic and foreign demand ushered in a recovery in the fourth quarter of 2020. National Day After the holiday, both domestic demand and export sales exploded, and domestic textile and clothing exports improved significantly throughout the fourth quarter. After the Spring Festival, the entire industry chain is expected to see further strengthening of demand. Foreign inventory replenishment demand and the traditional spring peak season have brought about significant price strength. However, the large-scale shutdown of refineries caused by the cold wave in the US Gulf has led to an unexpected reduction in import volume. The two resonate at the same time. Superimposed on crude oil, prices continued to rise. Throughout February, the price of the polyester industry chain rose significantly. The PTA05 contract rose by 15.6%, the EG05 contract rose by 28.5%, and the PF05 contract rose by 19.6%.
2. Production capacity is gradually released, and the industrial chain is collectively under pressure
Then in March, the market once again faced the main contradiction on the supply side. The polyester industry chain has been in a state of rapid release of production capacity in recent years. From PTA, MEG to polyester itself, the production capacity growth expectations in 2021 are far away. Exceeding previous years, PTA’s production capacity growth in 2021 is expected to reach 25.2%, MEG’s production capacity growth is expected to reach 44.7%, and short fiber’s production capacity growth in 2021 is expected to reach 18.8%. In the past three years, the average growth rates of production capacity of these three commodities were 7.7%, 24.9%, and 7.3% respectively, which means that the production growth rate of the polyester industry chain in 2021 is significantly greater than its average growth rate. On the other hand, when we look at the timing of these production capacity launches, it is not difficult to find that large installations are basically concentrated in May and June, that is, around the delivery of the 05 contract. This is also one of the reasons for the huge price fluctuations in the entire polyester industry chain. one. Before March, the market expected that demand would improve significantly, and at the same time there might be a risk of delays in new installations. Therefore, there would be no resistance to the improvement in near-end supply and demand, and prices would rise rapidly from February to March. As delivery approaches, the market has once again realized that if it continues to hold the current high price, once new production capacity is put on the market, it will face the risk of a rapid price drop. Therefore, counter-arbitrage forces will naturally form in the market. Then the market took a turn for the worse, and the overall price of the polyester industry chain fell back. The main contract price of PTA fell by 10% from the high point, MEG fell by more than 20%, and short fiber fell by more than 13%.
3. Demand rebounded as expected, but overall was less than expected
On the demand side, although the market has good expectations for it, from a more micro perspective, starting from the second half of 2020, there has been a recovery domestically and overseas. It has basically returned to normal levels. Sales of finished clothing in the United States have also recovered rapidly. With the gradual improvement of the new crown epidemic, the demand side of the United States has taken the lead in rebounding. By the first quarter of 2021, overall clothing sales have returned to the neutral level for the same period. The overall recovery of the demand side actually occurred in the second half of 2020. After the Spring Festival of 2021, when the market expected that terminal demand would continue to improve and the supply-side load continued to increase, we found that the actual demand growth rate had gradually slowed down. Domestic demand has even declined due to excessive speculative demand in the early stage, and foreign demand has also lost its explosive power due to concentrated stocking in the first quarter. At the same time, the pace of epidemic recovery at home and abroad has diverged, making domestic supply recover faster than abroad. Therefore, domestic exports have experienced significant growth since the second half of 2020. The resulting rapid increase in sea freight has affected subsequent exports. A bigger obstacle. In the second quarter, downstream textile orders were obviously affected by high sea freight. Overseas orders were hesitant to place orders, and some orders were backlogged domestically after being placed. This caused a significant contraction in textile and clothing exports in the second quarter. Therefore, when domestic sales are normal and export sales are blocked, the market’s expectations for an improvement in demand have gradually changed, and the decline in upstream prices has also gradually reduced the willingness of downstream stockings, ultimately forming a strong negative feedback, which has put pressure on upstream prices. obvious.
Independent Quotes
Polyester Due to the basic cost sources, the industrial chainhave a more direct impact.
Market Outlook in the Second Half of 2021
When we look forward to the market in the second half of 2021, We still cannot avoid two themes: capacity deployment and demand evolution. In the first half of 2021, the production of the two raw materials has basically been realized. In the second half of the year, the production of large equipment has basically been completed. The pressure for the next production will be concentrated in the first half of 2022. Therefore, the second half of the year will be more between the existing production capacity and the evolution of demand. game.
On the demand side, the autumn and winter peak seasons in the second half of the year mainly reflect the rebound in foreign demand, while domestic demand is relatively stable. Judging from the situation abroad, demand in the United States has returned to year-on-year highs since the second quarter, so the additional growth highlight of foreign demand will be in Europe. Europe is currently suffering from the attack of the new coronavirus Delta strain. Although the recovery process is clear, there may still be a further recovery in demand in the second half of the year, but at this moment we have to consider the possibility of a “black swan” in demand. sex, so we maintain a neutral judgment on demand. Based on the commonalities and characteristics discussed in the above paragraphs, we have made the following prospects for the three varieties of the polyester industry chain:
PTA
Supply side: PTA is expected to have no new equipment put into operation in the second half of the year. The second phase of Yisheng New Materials with a capacity of 3.3 million tons is expected to be put into operation in early 2022. Demand side: In the second half of the year, polyester production capacity of 2 to 3 million tons will be put into operation. The terminal demand remains neutral, and the polyester load is expected to remain around 92%.
Valuation: PTA’s current profits in every upstream link, including naphtha and PX, are at a relatively high level. Looking at the future of naphtha from the perspective of refinery supply recovery, Cracking profits are expected to decline. We expect the bottom support for profits from PX to naphtha to be around US$200-210. PTA’s own processing fees are in the surplus cycle. As long as the stock supply is elastic enough, we expect PTA’s growth in the second half of the year. The processing fee will remain around [300-500].
MEG
Supply side: 1.8 million tons of satellite petrochemicals in the first half of the year After Zhejiang Petrochemical’s 800,000 tons and Hubei Sanning’s 600,000 tons were put into production, the pace of MEG’s production has not stopped. In the second half of the year, Gulei Petrochemical’s 700,000 tons, Inner Mongolia Jianyuan’s 240,000 tons, and Guangxi Huayi’s 200,000 tons are about to be put into production. . Demand side: The demand side is expected to be consistent with PTA. Therefore, from a static perspective, MEG will always be in the accumulation channel in the second half of the year.
Valuation: The current overall profit of MEG is at a low level, which is strongly supported by costs. The cost of coal production is the highest. However, due to the huge conflict of excess MEG stock, it will be accompanied by domestic production in the future. As the price increases, the marginal supporting role of coal production will gradually weaken. We expect that the focus of MEG prices in the future will be accompanied by oil production costs.
PF
Supply end: The biggest problem at the short fiber supply end Due to the high level of recycling load, in the past three years, the overall supply growth rate (primary + recycled) of the short fiber industry has been around 0% year-on-year. As of the end of June 2021, this growth rate has reached 31% year-on-year. , at the same time, nearly 700,000 tons of raw staple fiber production capacity will be put into operation in the second half of the year, so the pressure on the supply side is greater. Demand side: Affected by high sea freight, the export of short fiber-related industries has been affected a lot. The probability of sea freight being reduced in 2021 is small. Global shipping capacity is still tight. The overall demand is expected to remain neutral. At the same time, the demand for short fiber is due to Directly connected to the terminal, so this end will be most directly affected by the “black swan” of the European epidemic.
Valuation: Staple fiber’s current profits are at a relatively low level, while downstream profits remain high. Therefore, we believe that the profits of short fiber will mainly fluctuate at the bottom in the second half of the year, and there may be a rebound at low profits in the short term. However, the contradiction of oversupply needs to be resolved by maintaining low profits, so the overall short fiber industry is expected to run weakly. </p
