After intensive maintenance in the early stage, PTA’s current upstream profit distribution shows a trend of high on both sides and low in the middle. Naphtha cracking profits and PTA’s own processing fees are at a neutrally high position, while PX’s own profits are at historically low levels. While the profits from refined oil cracking hit a new short-term high, why are PX profits at a relative bottom? Apart from the basic factor of oversupply of PX itself, are there other factors that affect PX’s overall profits? Is there any opportunity for PX’s overall profit to rebound in the future?
The composition of PX profits
It can be seen that the overall profit of PX in this round has declined from In May, the domestic tax order began. After a rebound in the middle, the PTA device continued to fall due to power cuts and centralized maintenance shutdowns, from a maximum of more than 250 US dollars/ton to a minimum of around 150 US dollars/ton. Judging from the profit structure of PX itself, the PX short-process profit (PX-MX) has a relatively limited decline from the previous high point, and this is mainly due to the periodic relaxation of PX supply and demand brought about by the centralized maintenance of PTA. This is true in PTA installations. It is expected to be alleviated after centralized restart. Excluding short-process profits, we found that in this round of sharp decline in PX profits, the decline in its short-process raw material MX was even greater (the short-process did not reduce production), and the upstream toluene (one of the raw materials of MX) fell It is also one of the important reasons for this round of decline. So when we considered this issue more deeply, we found that the statement “PX itself is undervalued” cannot be used to express all the reasons for the current low profits of PX. It can only express the profits of PX’s short process, and this The profit is actually consistent with the balance sheet we calculated. We need to pay more attention to its upstream, that is, why is the MX-toluene chain performing so sluggishly under the current background?
The reasons for low profits of MX and toluene
As we can see above, the price difference between MX and toluene and naphtha has reached a level close to the bottom in 2020. The background of 2020 is that under the impact of the epidemic, global consumption of refined oil products has fallen to historical lows. As can be seen from the Asian gasoline cracking profits in the figure below, the overall gasoline cracking in 2020 is at a historical low. Due to the overall sluggishness of gasoline, the demand for aromatics has also dropped to the freezing point. This is consistent with the phenomenon that aromatic profits bottomed out simultaneously in 2020. of. But time goes back to now. Today, when the profits of gasoline and overall refined oil products are at an overall high level, how did the profits of aromatics hit a low point? There is also a phenomenon here, that is, the valuation of aromatics at home and abroad is quite different, and the overall valuation of aromatics in the U.S. Gulf is higher than that in Asia. So here we actually draw a staged discussion to guide the next stage of exploration. That is, aromatics in Asia are significantly lower than aromatics estimates elsewhere in the world, and this phenomenon occurs against the backdrop of refined oil cracking in Asia being at synchronized highs.
The following part will start with the conclusion. We believe that there are two direct reasons for the sluggish aromatics market: (1) Domestic It is prohibited to privately import mixed aromatics for oil blending (2) The price of hydrogen has skyrocketed due to global shortages of natural gas and coal.
The first reason represents demand. Before the domestic refined oil tax order was promulgated in May, a large amount of light cycle oil and mixed aromatics were imported domestically for blending gasoline and diesel. After the tax order was promulgated, domestically imported mixed aromatics began to reduce production, and domestic refined oil resources also began to gradually Reduce outflow. This means that China has reduced the import of mixed aromatics through a reduction in demand (Figure 3: The domestic refining start-up process showed a significant decline in July – the operating rate indicator lags). As a result, there is a temporary surplus of mixed aromatics in Asia. The country has reduced the export of refined oil products to balance the supply of refined oil products due to reduced domestic production, which has also caused a significant increase in the price of gasoline in Singapore (in Figure 4, the price difference between domestic and foreign prices began to decline after May). It is this policy and the logic behind it that has caused the valuation of aromatics to continue to fall. From Figure 1, we can also see that after the tax order was promulgated in May, the overall profits of aromatics began to decline significantly.
The second reason represents supply. After the overall profits of aromatics fell to a low point, the next logic should have been to reduce production to support profits. However, we have seen that the profits of aromatics continue to break new lows, even reaching the valuation of refined oil products at the bottom last year. This means that the supply side has not actually seen a significant production reduction to support profits before. So why has the supply side never seen a substantial production reduction under such a low aromatics profit?
Figure 5 shows the domestic CIF price of LNG. After 2021, global natural gas prices have risen significantly, and domestic and foreign coal prices have also risen accordingly. Along with the price increases of these energy sources, There are hydrogen resources for refineries. As a by-product of natural gas chemical industry and coal chemical industry, hydrogen plays a decisive role in refineries. Most of the modern refinery processes for lightweighting require hydrogen for hydrorefining. In addition, the rise of natural gas C1 chemical industry has also brought about a significant increase in the overall price of C1-C4 light chemicals.Lifting.
As the main process for producing hydrogen in refineries, catalytic reforming despite facing overall Downstream aromatics prices are unfavorable, but due to the hydrogen and light hydrocarbon resources they produce, refinery reforming operations have always remained at a relatively high level (domestic and foreign), which makes it difficult for the supply side of aromatics to pass even under the background of low profits Overall compression to support profits.
Opportunities for PX’s overall profit expansion
So under the above two backgrounds, does proximal PX still have the potential to expand profits? We see that the price ratio of toluene to gasoline is already at a year-on-year low, and we also see in Figure 3 , the near-term profits of gasoline have increased significantly. This is related to the overall substitution effect of refined oil under the global energy shortage. The increase in diesel demand will inevitably cause refineries to adjust the output structure, and gasoline will also achieve a large profit due to this gain. magnitude growth. The impact of the overall increase in energy prices is greater than the local imbalance between supply and demand. If the price of gasoline remains strong, the economics of extracting aromatics from the mixture will drop significantly in the future. Even if the overall operating rate of catalytic reforming remains unchanged, the yield of aromatics will also decrease, thereby reducing the supply of some aromatics. support prices.
In addition, under the influence of the short-term and low-profit PX process, some refineries in Japan and South Korea have also begun to Corresponding burden reduction or production reduction has been implemented, including South Korea’s GS and Lotte devices. The maintenance of these devices is expected to bring about a slight increase in short-process profits. Therefore, PX profits are already at a relatively solid bottom at the current position. The prerequisite for a substantial expansion of short-process profits lies in whether the terminal polyester load can be significantly increased. If the polyester end load increases significantly, it is expected that the PTA end pressure will shift to polyester, and the upstream will provide more profit margins. But here we need to pay attention: the reason for the low load of the polyester terminal is the implementation of power restriction measures, and the fundamental reason for the power restriction is the shortage of energy. Therefore, if the load of the polyester terminal can be significantly increased, then the shortage of upstream energy must also be It has been alleviated to a certain extent, so at that time, intermediates such as hydrogen will no longer be a factor limiting the catalytic reforming load. Aromatic hydrocarbon profits (toluene, MX) can be further supported through adjustments on the supply side, and PX itself will be added due to polyester. If short-process profits expand due to expansion, then PX hopes to gain a more objective overall profit again.
But if the energy shortage cannot be solved, then although the overall valuation of aromatics is very low, although the PX end can get some profit recovery through production reduction of short-process devices, the overall upstream aromatics profit will be There is still no room for significant expansion. We can express this logic with the picture below.
Summary
PX’s profits fell sharply against the background of weak supply and demand of itself and weakening supply and demand of upstream toluene and mixed aromatics. However, due to the current situation of global energy shortage, the restructuring still maintains a relatively high load for the production of hydrogen and light products. out. The future improvement of PX profits lies in the load reduction and production reduction of short-process equipment. This part can increase PX’s own short-process profits. It is currently happening but the improvement is limited. The significant increase in PX profits lies in the rising profits of the upstream raw materials MX and toluene. In addition to the recovery of the demand side, the adjustment demand of the supply side is also important for the rise of these two. The premise of these adjustments is that the energy shortage is alleviated. Otherwise, it will be difficult to break through the current predicament of PX.
Strategic suggestions: When energy is relieved, you can allocate more PX and short-term related energy products; at the same time, in the long run, the current profit of PX has also reached a bottom, and it is recommended to expand on dips. PX profit.
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