Recently, the number of new coronavirus cases in India has continued to reach new highs. As an important part of the global polyester industry chain and cotton spinning industry, we cannot know the current real domestic demand and production problems in India, but we can still pass Some logistics situations in India are used to deduce the risks that may occur in the future and make corresponding plans.
Methodology
When we analyze India’s polyester industry chain When analyzing the impact, we first base our analysis on the premise that the ultimate goal is domestic corresponding targets (without contact barriers). When analyzing the target, we need to know whether the target is at the end of consumption in China? Or do China and India play the same role in this field (supplier or processing plant)?
1. At the consumption terminal in the country
If the product is at the consumption terminal in the country, it means Since this product can be fully digested domestically, or at least not exported, our consideration for this product is whether the incident in India will have an impact on the supply of this product;
2. Act as a domestic supplier (produce exports)
If the product plays the role of a domestic supplier, that is, produces export items, then we need Consider what position India occupies in the export composition of this commodity;
3. Domestic role as an intermediate processing factory
If China and India play the same role as processing plants in this bulk field, then theoretically, the domestic processing volume will increase. Assuming that global total demand remains unchanged, domestic processing profits should be supported. .
Overview of the Indian polyester industry chain and cotton spinning industry (global values in brackets)
India PTA production capacity is 10.21 million tons (10,000), MEG production capacity is 1.9 million tons (4,900), polyester production capacity is 8.3 million tons (12,500), cotton is 6 million tons (2,000), and cotton yarn is 4 million tons (1,400). From the perspective of India’s production capacity distribution, India occupies a larger proportion in the cotton spinning field. In the field of polyester, PTA production capacity has a certain influence in Asia. At the same time, polyester production capacity is second only to China in Asia. MEG relies partly on imports.
(1) Impact of polyester raw materials
MEG: First of all, domestically, MEG is a net imported commodity, which means MEG is a consumer terminal type in China. Let us turn our attention to India. From the perspective of existing production capacity, India’s domestic MEG production capacity gap is about 880,000 tons, which is consistent with India’s actual annual MEG imports. At present, India’s global import volume is around 1 million tons, with monthly imports of 70,000-80,000 tons. Judging from the source of imports, most imports come from Saudi Arabia and Kuwait. Saudi Arabia and Kuwait are net exporters, so assuming India’s domestic demand for MEG weakens, the pressure on this part of the import will be transferred to other countries around the world. Furthermore, it can be seen that the main direction of India’s MEG exports is China, so when its domestic demand changes, China is the direction in which its MEG pressure will shift. Here we make a rough estimate that the demand loss for MEG in India due to the epidemic is more than 30,000 tons per month (actually it may be more).
Through historical data, we can further confirm that from May to June 2020, India was blocked due to the epidemic. In the past two months, domestic imports of MEG from India have increased significantly, indicating that actual logistics shifts have occurred on the raw material side.
PTA: The role of domestic PTA belongs to the role of supplier, that is, the country itself is in a state of surplus, and the export of domestic PTA It can be seen that India has been the main destination for domestic PTA exports in the past few years. From January to March 2021, nearly 200,000 tons of the 630,000 tons of PTA exported domestically went to India. This part of exports will also be damaged in the subsequent impact of the outbreak in India. It is expected that the overall domestic export center will be reduced to about 250,000 tons in the future. Compared with domestic PTA, the impact is relatively small, but it is still an impact on the overall surplus situation of domestic PTA.
(2) Impact of polyester finished products
Start from the finished product , China’s role in polyester finished products is actually the same as that in India, both playing the role of processing plants. Looking at domestic exports of short fiber and filament, the proportion of domestic filament and short fiber exported to India is around 4%. The overall volume of domestic polyester filament exports is about 3.5 million tons, which means that the proportion of polyester exported to India The amount of filament is about 150,000 tons, which translates into about US$150 million. From the perspective of polyester yarn, the trade relationship between China and India in intermediate polyester yarn is relatively small.
From the perspective of pure polyester yarn, the volume of domestic pure polyester yarn exported to India is about 10,000 tons, accounting for the total domestic output Less than 30%.
But when we look at the final data, we find that India’s textiles in Southeast Asia Exports account for a large proportion. As shown in the figure below, in the past 10 years, despite the growth of exports from other Southeast Asian countries, India’s export proportion of textiles has always been more than 15%, and the overall export value was close to 10 billion US dollars.
According to the third role methodology, India, as a processing plant, assumes that it has lost some processing plants under the impact of the epidemic. function, then the domestic industrial chain, which is also an intermediate processing link, will benefit from this, and the pressure on the transfer of raw materials (the trade volume of polyester filaments and polyester yarns is small) is relatively small, so the benefits from the final product end will increase .
Judging from the situation in 2020, after the global epidemic broke out in 2020, foreign demand rebounded after bottoming out in May-June, while exports to Southeast Asia rebounded at the end of March. The epidemic in Southeast Asia reached its peak from April to May, and India implemented a blockade from April to June. However, during this period, domestic exports did not increase significantly, so demand and supply were affected simultaneously in 2020 last year. .
In 2021, overall demand in Europe and the United States is recovering, and overall clothing sales in the United States have returned to normal seasonality. , and the extent of the epidemic in India is more serious than last year. Against the background of overall upward demand, the supply-side gap will inevitably be transferred to other processing regions in Asia.
The above picture is India’s relevant import and export data in the cotton textile industry chain. It can be seen that in India’s cotton spinning industry, both raw material cotton and finished cotton yarn are in a state of surplus, that is, both are export-oriented commodities. In the case of cotton spinning, India’s impact is obviously much greater, but because cotton production is relatively less affected, the main impact is on the export of cotton yarn. So in cotton yarn producing countries outside India (mainly China), we can see an increase in cotton yarn profits. At the same time, for local cotton, it is equivalent to an increase in demand in the region and the supply remains unchanged, so the raw materials will also be driven to a certain extent.
Summary
India plays a relatively important role in the global polyester industry chain Important role, the epidemic in India, regardless of the specific domestic situation, assuming that its domestic industry has been affected to a certain extent, it will have different impacts on the raw materials and finished products of the polyester industry chain. In terms of raw materials: Domestic imports of MEG will increase, mainly due to the reduction in India’s original imports and transfer to the country. It is optimistically estimated to be more than 30,000 tons a month. PTA is currently the main export destination in China. Therefore, the epidemic in India will affect domestic PTA exports. The overall impact is relatively small, but it still puts pressure on the domestic PTA surplus reality. In terms of finished products: China and India both belong to the terminal textile processing link. After India is affected, part of its production profits should be transferred to the country to support domestic textile processing profits in disguise, thus providing certain support for polyester yarns.
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