Recently, the price difference between PTA and ethylene glycol has continued to strengthen. The current price difference between the PTA2309 contract and the ethylene glycol 2309 contract has steadily risen to 1,800 yuan/ton, a new high in the past year.
Liu Siqi, an analyst at Zijin Tianfeng Futures, said that the overall macro sentiment has improved recently, and the focus of chemical products has collectively shifted upward. Crude oil prices have risen sharply, gasoline supply is tight, and high-octane aromatics products remain strong. After ethylene glycol oversold in June, affected by the rebound in coal prices and the increase in unplanned maintenance, it also fluctuated upward. However, suppressed by high inventories, ethylene glycol has insufficient upward drive and the increase is limited. As a member of aromatic hydrocarbons, PTA is strongly supported by cost-end crude oil and aromatics, and its center of gravity continues to shift upward. As a result, the price difference between PTA and ethylene glycol has reached a new high.
In fact, through combing, the reporter observed that the price difference between PTA and ethylene glycol has fluctuated greatly this year. Among them, there was a rapid rise in the second quarter, and then continued to fall back to below 900 yuan/ton.
“This round of fluctuations in the price difference between varieties is caused by the liquidity of PTA changing from tight to loose, and also affected by the fall in PX prices after April. It has continued to rebound since mid-May, but the trend is slightly slower than in the second quarter. Currently, the second quarter The price difference has reached the first line of 1,800 yuan/ton, mainly because PX, the raw material for PTA, is stronger than naphtha, the raw material for ethylene glycol.” said Pang Chunyan, chief analyst of SDIC Anxin Futures Chemicals.
In Pang Chunyan’s view, the extreme value of the price difference between the two often appears when the contradiction between supply and demand of a certain product is highlighted. For example, the price difference rose due to tight liquidity of PTA in the second quarter of this year. However, the rising price difference that has occurred since the second quarter is due to the two. It is caused by the strength of raw materials. Specifically, PX performed significantly better than naphtha, with the price difference between the two widening from around US$400/ton in April to more than US$450/ton.
“Historically, the minimum price difference between the two waves appeared in 2021.” Ma Junyi, a researcher at Dadi Futures, said that the first wave was from the end of February to the beginning of March 2021, when ethylene glycol was affected by the cold wave weather and the overall supply decreased. Obviously, the continued decline in inventories has caused ethylene glycol prices to continue to rise. The second wave occurred from October to November 2021. At that time, thermal coal prices rose, while the overall PTA inventory was high, and crude oil was weakly supported by the epidemic. Against the background of cost-side support differentiation, the price difference between PTA and ethylene glycol has experienced two minimum values. The highest value of the price difference will appear in June 2022, March-April this year and July this year respectively. In addition to the oil adjustment logic driving cost-end valuation support, the market from March-April this year also has a phased PTA circulation inventory bias. Blessed by few factors. “On the whole, the extreme value of the price difference appears either in the context of a significant upward shift in costs, or in the context of phased supply reduction and overall tight supply of circulating goods.”
“It is not difficult to see that there are three main driving factors for the expansion of the price difference between PTA and ethylene glycol: first, the difference in raw materials, crude oil is stronger than coal; second, aromatics are stronger than olefins, and the demand for aromatic oil blending is strong, while the demand for olefin chemicals is insufficient; third, Due to differences in their own fundamentals, PTA has balanced destocking and the absolute inventory is not high, while the explicit inventory at the ethylene glycol port is at a high level and the explicit inventory removal is slow. When the three factors exist at the same time, the price difference between the two may continue to strengthen.” Liu Siqi said.
According to Ma Junyi, since the Russia-Ukraine conflict in 2022, the active contract spread between PTA and ethylene glycol has continued to be at historically high levels. In addition to the overall low valuation caused by the production cycle, which forces the price of ethylene glycol to continue to run at a low level, the strength of the overall aromatics and the drive of oil adjustment logic also make the PTA end (aromatics) more valuable than the ethylene glycol end (olefins) higher.
“When the overall oil adjustment logic is driven, the amount of aromatics exported from Asia to the United States has increased, and the overall price difference between light and heavy naphtha has strengthened, and in the same direction, the price difference between PTA and ethylene glycol has widened. In addition, with the increase in coal inventories, Accumulated, the price of coal, the other cost end of ethylene glycol, has fallen, exacerbating the widening of the price difference between PTA and ethylene glycol.
Currently, ethylene glycol is in a surplus cycle as a whole, it is difficult to remove explicit inventory at ports, profits are at a low level, and there is not much room for upside and downside, so the overall fluctuations have declined compared to before. “The driving variable of the price difference between PTA and ethylene glycol is mainly PTA. With the current strength of crude oil and gasoline, PTA may fluctuate with costs, and the price difference between PTA and ethylene glycol will remain high in the short term.” Liu Siqi said.
However, in Ma Junyi’s view, the overall valuation of ethylene glycol is more advantageous in the second half of the year, given the expected supply reduction and the nearing completion of production. “In the context of increased PX supply at the cost end and easing liquidity, the overall valuation of PTA will decline. However, there will be more production conversions and maintenance of ethylene glycol in the second half of the year. There is news that the strike in Canada will affect the amount of imported ethylene glycol. The forward price of ethylene glycol still has recovery momentum under low valuation, and the price difference between PTA and ethylene glycol may narrow in the later period.”
Pang Chunyan also believes that there is an opportunity for the price difference between the two to narrow in the future market, and the key variable is demand. “The recent trend of gasoline has been strong, and the demand for aromatic hydrocarbons has caused its price to follow the strength of the oil market. However, this demand will weaken with the end of summer gasoline demand, and the valuation of aromatic hydrocarbons is expected to be reduced; the main naphtha The demand is in the chemical market, but as the weather gets cooler, there may be aA certain proportion can enter the gasoline blending pool. In addition, as propane and other raw materials are used as cracking raw materials, the substitution effect will also be weakened, and the valuation of naphtha is expected to be restored upward. Therefore, judging from the demand for oil adjustment, the price difference between PX and naphtha is expected to narrow after August. “Pang Chunyan believes that if the demand for chemicals can strengthen as expected, it will also be conducive to the repair of naphtha valuations. However, the demand for PX downstream chemicals has always been at a high level, and the room for upward repair is significantly lower than that of other olefin chemical terminal repairs. space. Therefore, the price difference between PX and naphtha is more likely to fall back in the future.
“From a cost perspective, the relationship between PTA and ethylene glycol may change. But from a supply and demand perspective, PTA is still better than ethylene glycol, especially since there are still several large units that have not completed annual maintenance. Once the maintenance period is concentrated, , it is easy to cause tension in the supply and demand side of PTA again.” Pang Chunyan said that grasping the price difference trend of the two varieties in the later period mainly depends on the market transaction logic. “If transaction costs are logical, we can seize the periodic opportunity of shorting PTA and polyethylene glycol. If PTA equipment is undergoing centralized maintenance, we should plan for the upward price difference brought about by the strengthening of PTA prices.” She said.