PTA is hard to beat due to oversupply and is still bearish in the short term.

Previously, PTA prices showed V-shaped fluctuations. The main futures contract fell from around 5,800 yuan/ton at the beginning of the month to a low of 5,400 yuan/ton in the middl…

Previously, PTA prices showed V-shaped fluctuations. The main futures contract fell from around 5,800 yuan/ton at the beginning of the month to a low of 5,400 yuan/ton in the middle to late period. The spot price dropped from 5,600 yuan/ton at the beginning of the month to a low near 5,450 yuan/ton in the middle to late period. , the current PTA spot processing fee is 299 yuan / ton, the entire industry is losing money, and companies are less motivated to start operations. With the news that some PTA devices have been shut down and planned to reduce loads, the PTA spot basis has strengthened slightly. With low processing fees, subsequent companies are expected to see declines.

1. The inventory has been accumulated for two consecutive months, resulting in low processing fees.

The growth rate of PTA production capacity in 2022 is lower than the growth rate of polyester production capacity. Due to the shortage of raw materials and low processing fees, the output growth rate has declined significantly. The steady growth of polyester production capacity has led to a narrow destocking of PTA in 2022. However, with the new production capacity put into operation, PTA output has increased significantly, and the accumulation of inventory is expected to rise again.

Looking back from historical data, under the premise of accumulating supply and demand for PTA, compression of processing fees is a high-probability event. Especially during the production cycle from 2019 to the present, PTA processing fees have shown a high and falling pattern. Starting from January this year, PTA devices have been restarted one after another. , the supply volume rebounded rapidly. In January, the inventory accumulation was around 700,000 tons, and the output was 4.41 million tons. In February, the inventory accumulation was around 200,000 tons, and the output was 4.3107 million tons. PTA has accumulated inventory for more than two consecutive months, resulting in PTA processing fees. It dropped significantly in the second month. Affected by the Spring Festival holiday, downstream polyester and terminal weaving are in the traditional off-season for demand. Polyester maintains low operating load and output is at the lowest level in the past three years. Downstream polyester factories restarted one after another in February, but terminal recovery was slower than expected, and PTA supply remains high. It is expected that PTA will still be in a cumulative inventory situation in the future, with excess supply squeezing processing fees.

2. PX squeezes PTA profits and becomes the norm

Both toluene and MX can be used for oil blending, and are also raw materials for processing PX. Previously, BTX experienced a sharp rise due to the influence of the oil blending market. Among them, the price of MX has increased the most. The absolute price of PX has increased sharply driven by the price of MX on the direct cost side. On the contrary, the price difference between PX and MX has weakened all the way or even reversed. At one time, “flour was more expensive than bread”. Judging from specific data, the average PX-MX price difference in 2022 is US$60/ton. According to industry cost practices, the PX-MX end is in a state of loss, especially during the oil adjustment market in the middle of the year, the PX-MX price difference fell to 5 historical low (-49.5 US dollars / ton). Looking at the toluene disproportionation end, disproportionation profits also fell sharply during the oil adjustment market. It was not until gasoline stocks were accumulated in November and December that aromatics price differentials fell back, and disproportionation profits were restored. Whether it is toluene or PX made from MX, they have not enjoyed dividends from the oil blending market. Selling raw materials is more cost-effective than selling products. This is one of the reasons why the supply of PX has been tight since last year.

As a relatively upstream petrochemical product, the long-term absolute price trend of PX is highly consistent with that of crude oil. Due to the high concentration of production capacity, project and technology barriers, most of the processing fees in the crude oil-PTA industry chain are occupied by PX. Since several domestic integrated private refining and chemical companies were put into operation, the profits of the crude oil-PTA industry chain have been compressed. In the face of the global epidemic outbreak in 2020, the price difference between crude oil and PTA processing was further pushed to a historical low of around 1,530 yuan/ton. The recovery of overseas demand in the post-epidemic era, coupled with the mismatch between supply and demand caused by the Russia-Ukraine conflict, led to some recovery in industrial profits in the first half of last year. However, in the second half of the year, the overseas economy weakened against the background of interest rate hikes, and domestic downstream demand was affected by the epidemic. The industrial chain Profits were compressed again, with two lows falling to around 1850. Last year, the overall price was affected by the logic of refined oil products. Gasoline prices were strong. The shortage of raw material mx caused the px spot to be in a tight state. Last year, PX imports were 10.43 million tons, the lowest level in five years. The low level is mainly due to the continuous losses that have dampened the enthusiasm of PX companies for production. The commissioning of new devices in January 2023 was less than expected, and the second quarter is the traditional peak season for refinery maintenance, such as Zhejiang Petrochemical Phase I with 4 million tons and Urumqi with 1 million tons. , Fuhai’s 1 million ton phase 1 and Hengyi Brunei’s 1.5 million ton PX units have been shut down for maintenance, leading to expectations of tight supply in the second quarter. However, the increase in PTA on the demand side is obvious, making PX continue to be strong under the logic of supply and demand. The profits of the industrial chain have obviously been transferred to the PX end.

3. PX second quarter maintenance season will bring cost benefits

Hengli’s 5-million-ton unit will be put into production in the first quarter. However, with this low processing fee, the production efficiency is not high. Therefore, Dahua 375 plans to reduce the load for 5-7 days; Sichuan Energy Investment will temporarily stop for 7-10 days on the 27th. Zhongtai will restart at the end of the month, Hengli 1# is scheduled to be overhauled in March and January, and the new device Hengli Huizhou is expected to be discharged in mid-March. The maintenance capacity involved is about 5.2 million tons. Generally speaking, PTA factories will not reduce their maintenance burden due to a short-term decline in processing fees. That is, it will still take time for the low processing fees to be transmitted to the decline in startup load, and the reaction of the startup rate will lag behind. However, as processing fees continue to be low, the probability of a significant drop in startup load increases. Currently, PTA’s startup load is at 75.77%. If low processing fees continue, there is still room for PTA’s startup load to continue to decrease. balanceJudging from the table, the balance in March was tight. From April onwards, it was clear that the amount of maintenance was not high, and there was a slight accumulation of inventory pressure.

Summary and outlook

At present, most terminal factories are still mainly digesting existing orders before the Spring Festival. Domestic sales orders have only slightly increased. Foreign trade is affected by high inventory and new orders are still not issued smoothly. The overall situation is still weaker than the same period last year, and finished product inventory has accumulated again. Moreover, 14 million tons of new production capacity this year, including Hengli, has not yet been put into operation, and PTA is still bearish in the short term.

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Author: clsrich