Although polyester products had a good start on the first day after the holiday, the upward trend failed to continue. Recently, the prices of various polyester varieties have been adjusted to varying degrees. At the same time, PTA processing fees and oil-based ethylene glycol profits have been significantly reduced to a state of loss. Post-holiday polyester market production and sales were sluggish. Even after the fifteenth day of the first lunar month, the pace of downstream resumption of work was still relatively slow, and the overall polyester market performance fell short of market expectations.
Processing fees dropped sharply after the Spring Festival
The reporter learned from the Chemical Fiber Information Network that PTA processing fees have been rapidly compressed recently. It dropped from 576 yuan/ton before the Spring Festival to 306 yuan/ton, a drop of nearly 47%, a new low since May 2020. PTA manufacturers are once again facing losses. Ethylene glycol is in a state of overall loss, with the theoretical loss of the naphtha integrated unit reaching a record high of US$170/ton.
“PTA processing fees dropped sharply after the Spring Festival. The main reason is that during the Spring Festival, the PTA equipment was operating normally and downstream polyester was subject to seasonal maintenance. As a result, the market had abundant spot stocks and prices were under pressure after PTA’s seasonal inventory accumulation.” Pang Chunyan, analyst at SDIC Essence Futures express.
In fact, in the PTA industry chain, processing fees are an indispensable factor in judging market sentiment. The processing fee reflects the profit of PTA spot processing and is also the focus of market participants in each survey. According to industry insiders, the level of processing fees will directly affect the production enthusiasm of enterprises, and then affect prices through supply.
“Generally, when processing fees are high, PTA production profits are good, companies are highly motivated to produce, and the supply of PTA is expected to increase; when processing fees are low, companies are less motivated to produce, and PTA supply is expected to decrease.” Pang Chunyan said.
According to Pang Chunyan, from 2014 to 2016, PTA processing fees were at a low level, and some higher-cost devices had difficulty making profits. Therefore, Fujian Jialong 600,000 tons, Pengwei Petrochemical 900,000 tons, Hanbang Petrochemical 700,000 tons and Yisheng Small petrochemical equipment with a capacity of 650,000 tons was temporarily idle for a long time. Equipment with less profitability such as Liaoyang Petrochemical with 800,000 tons, BP Petrochemical with 600,000 tons, and Yisheng Ningbo with 650,000 tons, directly exited the PTA market. Since the end of 2016, PTA processing fees have rebounded, and some old equipment that has been parked for a long time have begun to plan to restart. Pengwei Petrochemical, Fujian Jialong, Hanbang Petrochemical, etc. have restarted small lines. In 2018, PTA’s processing fees remained at a high level as a whole, companies were highly motivated to produce, and overproduction was common. This high processing fee situation continued into 2019.
“After entering 2019, as the refining and chemical integration unit was put into production, the growth of polyester slowed down due to the epidemic, and PTA inventory increased significantly. PTA manufacturers once again faced the dilemma of overcapacity, and high processing fees fell as new production capacity was put into production. This is a phenomenon in which the PTA industry chain enters a situation of oversupply and the market clears excess production capacity by compressing profits.” Tianfeng Futures analyst Liu Siqi said.
Pang Chunyan told reporters that in recent years, the PTA production scale of leading companies has continued to expand, and large companies have obvious cost advantages. In addition, the PTA processing fee balance point mentioned in the market is 580 yuan/ton, which is only the average situation in the industry. The actual processing fee of each company will be different.
According to industry insiders, PTA processing fees are currently at a low level. On the one hand, the industry is in a period of capacity expansion and supply growth is obvious; on the other hand, new production capacity is mostly supporting the upstream and downstream of the polyester industry chain, which has the advantage of industrial chain integration. . In addition, the new capacity represents state-of-the-art production technology and production costs are also reduced. The low processing fees in the past two years are the result of the rapid development of the industry and are related to a variety of factors.
Polyester product inventories rise rapidly
Currently, processing fees are being compressed rapidly and the industry’s low profits are also related to weak market demand. The reporter learned that after returning from the holiday, the performance of polyester production and sales was light, with average production and sales less than 50%, and polyester product inventory increased rapidly.
It is understood that the inventory of FDY and DTY has been around 30 days, POY inventory has been around 25-26 days, and polyester short inventory has been around 14 days. The inventory of each product has refreshed the high point of last year. Downstream polyester inventories also continue to rise. Among them, staple fiber product inventories are close to historical highs, and filament yarn inventories are also continuing to rise, both at the highest levels in the same period in history. The weak production and sales of polyester also suppressed the enthusiasm of polyester factories to purchase raw materials, resulting in a slow downward transfer of PTA inventory.
“The formation of polyester product inventory is related to the production of polyester factories and the procurement rhythm of downstream links.” Pang Chunyan said that at the end of 2021, oil prices have risen to high levels, terminal orders have been average, polyester stocks are abundant, and terminal companies are stocking up. Not very motivated. At the same time, due to the power outage shutdown from the third quarter to the fourth quarter of 2021, and the possible mandatory shutdown of polyester factories around Hangzhou in September 2022, many polyester factories did not arrange maintenance during the Spring Festival this year, resulting in a high operating rate in the industry. Supply is high but demand is declining, and polyester factory inventories have rebounded significantly.
In this regard, Zheshang Futures analyst Zhu Lihang also believes that the accumulation of polyester products is seasonal. Judging from the current inventory days, filament and staple fiber inventories have indeed reached a high level.
“High production capacity and high inventory are the current status quo of the polyester market. Whether the subsequent high production capacity can be maintained is mainly based onIt depends on whether the inventory can be digested to normal levels. “Zhu Lihang said that there is still room for price reduction promotions at the current level of polyester efficiency, and terminal demand is also recovering, making it difficult to effectively evaluate. If the subsequent price reduction promotions are effective, the high start-up of polyester production is expected to be maintained.” From what we know so far, Look, terminal orders are not particularly ideal, and they are mainly focused on processing pre-holiday orders. Compared with everyone’s optimistic expectations before the holiday, it is indeed somewhat unsatisfactory, and further follow-up is still needed.
“Judging from the current news, the Suzhou area has been affected by the epidemic, and there are indeed some inconveniences in logistics, which has affected the recovery progress of the downstream to a certain extent. At least from the perspective of the load on the polyester factory, it has not been greatly affected.” Zhu Lihang said that because the terminal is still in the recovery process, the specific impact is difficult to judge for the time being. However, the current epidemic situation in Suzhou is still under control and will not have much interference with the operation of enterprises.
When will the profits of the industrial chain be restored?
Judging from the current profit distribution of the polyester industry chain, the profits of upstream naphtha have always been relatively good. PX began to repair profits at the end of last year and has now returned to the ideal level. There is room for squeeze in the market outlook. PTA processing margin is low, and the market outlook may rebound from a low level with the arrival of the intensive maintenance season.
“The profit of ethylene glycol is low, and the profit of the overall ethylene cracking downstream products is relatively poor. Therefore, news of load reduction of Sinopec units has been circulated many times this week. There is also the possibility of profit recovery of ethylene glycol in the future, mainly through the conversion of EG to EO production. In addition, It is also possible to reduce the load of the overall ethylene cracking unit,” Pang Chunyan said.
Due to losses last year, the PTA factory actively overhauled and continued to reduce the supply of contracted goods. It is understood that compared with last year, the number of long-term agreements signed by major manufacturers this year has been significantly reduced since the beginning of the year. To a certain extent, history has been repeated.
“If low processing fees are maintained for a long time, when the supply side begins to undergo a large number of maintenance in the later period, there is a certain probability that it will be accompanied by a reduction in contracted goods.” Zhu Lihang said.
In this regard, Pang Chunyan also believes that if the low processing fees this year are maintained until March, active maintenance of equipment will still occur. Whether it will eventually occur depends on the trend of processing fees, but the reduction in contracted goods should not simply repeat. In her opinion, last year, the contract supply of mainstream suppliers was relatively full. This year, companies may consider in advance that the overall contract supply volume should be lower than last year.
“In 2021, PTA’s low-profit maintenance will increase, resulting in insufficient supply of contracted goods from mainstream suppliers, and there will be a phenomenon of reducing contracted goods. If factory maintenance increases in 2022, it is also possible that manufacturers will start to reduce the supply of contracted goods, but this year’s suppliers The proportion of PTA contract goods signed is not high, and factories may reduce contract goods compared with last year.” Liu Siqi believes.
It is worth noting that PTA itself is in the seasonal off-season after the holidays, and supply and demand are relatively weak before demand has recovered.
“If the current profit level is maintained for a long time, there is a high probability that the PTA supply side will undergo unexpected maintenance in the future. After prices continue to weaken, the overall profit level of the PTA industry chain is also relatively low, not just PTA processing fees.” In Zhu Lihang It seems that the current profit level will not last long, and the continued low price is also related to the impact of crude oil on the cost side. “As long as the uncertainties in oil prices come to an end and prices stabilize, the profits of the PTA industry chain may be restored.”
According to CCFEI device dynamics, mainstream suppliers have announced maintenance plans for March to April, and the follow-up will depend on the actual implementation of factory maintenance.
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