Report Summary
Trend Rating: PTA: Shock
Report Date: December 30, 2020
★Polyester The contradiction between supply and demand is small, and it is expected to benefit from the recovery of terminal demand
The performance of terminal consumption shows obvious differentiation at home and abroad, mainly due to the different epidemic situations experienced at home and abroad, resulting in large differences in consumption. The current bottleneck mainly occurs in the external demand part, but it is still closely related to the future epidemic situation overseas. Compared with the centralized expansion of capacity in the upstream, polyester terminal capacity expansion has been relatively orderly in recent years, so it is also most expected to benefit from the positive feedback to the upstream formed by future demand recovery. Most of the new polyester project plans are the expansion of capacity by leading companies, with a high degree of certainty.
★Resolving the contradiction between PTA supply and demand requires low profits, which forces supply-side compression
PTA has entered the peak period of capacity expansion in 2020, and social inventories continue to rise and face depletion. resolve difficult situations. Throughout the year, polyester production capacity growth is not low. The key to the inability to reduce PTA inventory is the rapid expansion of the supply side, not weak demand growth. Therefore, the core of resolving PTA excess lies in compressing supply. In the future, the profits of the industrial chain may be tilted towards the downstream of PTA. As new PTA devices are put into production in the first quarter, PTA processing fees will be significantly compressed, and the path of compression is likely to be through cost increases.
★In a low-profit environment, cost support will be the main influencing factor for PTA
As the supporting PX devices for large refining and chemical companies are gradually put into operation, domestic PX supply continues Maintaining rapid growth and limited reduction in superimposed import volume, PX stocks rose rapidly and PXN was significantly compressed. PTA’s continued capacity expansion and PX supply-side adjustment are the keys to PX’s profit recovery. The increase in PX supply is expected to be relatively limited in the first half of 2021. If the pace of PTA’s capacity expansion is not significantly delayed, there is room for PX to repair the contradiction between supply and demand in stages. The possible repair of PXN will form a cost support for PTA. It should be noted that the supply-side reduction caused by the serious surplus of PTA will also offset the rigid demand for PX.
★Investment Suggestions
In 2021, PTA capacity expansion will be much faster than that of downstream companies. Even if the polyester end maintains a steady expansion rhythm, the PTA surplus pattern It’s already relatively clear. The positive feedback from demand will boost the PTA side due to high PTA inventory. It is difficult to solve the contradiction between supply and demand of PTA by relying solely on demand expansion. In the low processing fee stage, the price trend of PTA will be more affected by cost-side fluctuations. We believe that there may be room for sustained increases in oil prices in the second and third quarters. The absolute prices of PX and PTA are still expected to benefit from rising costs in stages. Excess pressure is intertwined with cost support. In 2021, PTA as a whole will be in the bottoming stage. The price is mainly driven by cost-side fluctuations. Processing fees will be subject to capacity expansion. The price is expected to run in the range of 3,400-4,400 yuan/ton.
★Risk Warning
The commissioning of the device was significantly delayed, and oil prices fell sharply.
Full text of the report
1 Review of PTA trends in 2020
2020 Affected by the COVID-19 epidemic and the plummeting oil prices, the overall price focus of PTA has shifted significantly. The spot price of PTA futures continued to fall in the first quarter. On the one hand, it was due to the domestic COVID-19 epidemic that delayed the resumption of work and production downstream of PTA, and terminal demand dropped to freezing point, which caused a significant accumulation of inventory from top to bottom in the industrial chain. On the other hand, it was due to the early March The collapse in crude oil prices caused costs to collapse. In April, the COVID-19 epidemic spread overseas, causing a global isolation and blockade, and foreign demand plummeted. PTA followed the oil price to a second bottom in late April, and the main contract fell to a record low. Subsequently, oil prices bottomed out and rebounded. However, PTA was trapped in the weakness of supply and demand fundamentals and has been hovering in the bottom range. In the second half of the year, the overall trend of PTA mainly followed cost fluctuations. After September, it showed a downward trend due to weak oil prices and excess pressure. Since mid-November, oil prices have risen strongly due to the optimistic expectations of the new crown vaccine. PTA has followed suit due to rising costs, but it is still subject to In terms of supply and demand fundamentals, the rebound is far less than that of oil prices.
2 The contradiction between polyester supply and demand is small and is expected to benefit from the recovery of terminal demand
2.1 The key to the recovery of terminal demand lies in overseas demand
In 2020, the downstream weaving link of PTA was greatly affected by the epidemic. On the one hand, the resumption of work was delayed during the severe period of the domestic epidemic, and on the other hand, since the second and third quarters, the overseas epidemic has worsened. The sharp decline in domestic and foreign demand orders has caused the inventory of finished gray fabrics and yarns to hit a five-year high, which has significantly suppressed the operating rate. The situation has improved since entering the fourth quarter. Domestic and foreign trade orders have improved intensively. The domestic “Double Eleven” order peak coincides with the increase in overseas end-of-year holiday consumer orders and some reshoring orders. The boost to the weaving industry is very obvious. The looms The operating rate rose to a five-year high, and finished product inventories were rapidly reduced. However, this wave of concentrated demand was not sustainable. After seasonal orders fell, the operating rate and inventory status deteriorated. The overall weaving orders are still lower than the same period in previous years. The foreign epidemic situation is still severe. At the same time, foreign trade companies have to face a sharp increase in shipping costs when receiving orders. The weaving industry still needs to wait for the overseas epidemic to be controlled and terminal consumption to further recover to form positive feedback to the upstream.
There are obvious differences in the performance of terminal consumption at home and abroad, mainly due to the different epidemic situations experienced at home and abroad, resulting in large differences in consumption. Domestic demand has recovered relatively well after the domestic epidemic has been brought under control. Since August, the monthly retail sales of domestic clothing, shoes, hats, needles, and textiles have beenThousands of tons/year. As PX equipment supporting large refining and chemical companies has been put into operation, domestic PX supply continues to maintain rapid growth. In the first 11 months of 2020, output reached 18.61 million tons, a year-on-year increase of 5.666 million tons (or 43.8%). The import volume was basically the same as the previous year. In the first 10 months, the import volume was 11.726 million tons, a slight decrease of 809,000 tons year-on-year. It is expected that the import dependence for the whole year will drop to 40%. Large-scale devices launched in the past two years have steadily released supply, and the reduction in superimposed import volume has been limited, causing PX stocks to rise rapidly. PXN was greatly compressed in the second quarter, reaching a minimum of around US$120/ton. Continuing low profits have caused some PX devices in Asia to be permanently suspended or reduced, and the overall supply in the Asian market declined month-on-month in the second and third quarters. Japan’s JXTG has lowered its overall PX device operating rate to 60% since the beginning of this year, and some small-capacity devices have been shut down for a long time. Among the current effective production capacities in the Asian market, the production capacity of devices that have been shut down or planned to be shut down for a long time is about 2.77 million tons/year, accounting for about 2.77 million tons per year in Asia. 5% of total production capacity. Due to the impact of long-term contracts, the stable import volume of PX has also increased the pressure on domestic PX inventories to a certain extent. The contract volume of Japanese and Korean companies will decrease in 2021, and import volumes are also expected to be compressed in the future.
PTA’s continued capacity expansion and PX supply-side adjustment are the keys to PX profit restoration. The PX planned capacity expansion in 2021 is expected to be 5.8 million tons/year, which can meet the new PTA production capacity of nearly 9 million tons/year. What is worthy of attention on the PX side is the plan to put into operation the second phase of Zhejiang Petrochemical’s equipment. It is currently expected to put into operation 2.5 million tons/year of production capacity in the second and third quarters. The initial PX maintenance plan in the Asian market is concentrated in the second quarter. Therefore, in the first half of the year, the increase in PX supply is relatively limited. If the PTA expansion rhythm is not significantly delayed in the first half of the year, there is room for PX to repair the contradiction between supply and demand in stages. PXN It may be restored to around US$200/ton, which will form cost support for PTA. Throughout the year, the increase in rigid demand brought about by PTA capacity expansion is beneficial to PX destocking. However, it should be noted that the supply-side reduction caused by the serious excess of PTA will also offset the rigid demand for PX accordingly.
5 Investment Suggestions
2021 The PTA capacity expansion rate is much faster than that of the downstream. Even if the polyester end maintains a stable capacity expansion rhythm, the PTA surplus pattern is already relatively clear. Terminal demand is expected to further improve. Domestic consumption will grow steadily. A significant recovery in overseas demand will require the epidemic to be controlled. However, the positive feedback from demand for the PTA side will be weakened due to high PTA inventory. It is difficult to solve PTA by relying solely on demand expansion. The key to resolving the contradiction between supply and demand lies in supply-side compression. PTA processing fees need to be further compressed, which is likely to occur in the first half of the year when capacity expansion is concentrated. In the low processing fee stage, the price trend of PTA will be more affected by cost-side fluctuations. We believe that there may be room for sustained increases in oil prices in the second and third quarters. The absolute prices of PX and PTA are still expected to benefit from rising costs in stages. Excess pressure is intertwined with cost support. PTA as a whole will be in the bottoming stage in 2021. The price is mainly driven by cost, and processing fees will be subject to capacity expansion. The price is expected to run in the range of 3,400-4,400 yuan/ton.
4 Risk Warning
The commissioning of the device was significantly delayed, and oil prices fell sharply. </p
