The tightening of PTA supply and demand pushes up the future price, and the pressure of plant production is greater

In February, crude oil continued to rise due to various favorable effects. The chemicals sector was boosted by costs and followed the rise. Polyester was among the top gainers in this round of gains. The top reasons are mainly as follows: During the Spring Festival, the earthquake in Japan caused some PX to stop, Asian PX quotations were strong, and the PTA processing difference was once compressed to below 200 CNY/ton; since October last year, the import volume of ethylene glycol has continued to decline, 2 The cold wave in the U.S. led to short-term shutdowns of some installations. The recent import end "out of stock" is expected to be strong, the import source quotation is high, and the basis continues to strengthen; the start of polyester production remains at a relatively high level. Soon, the average monthly operating rate is over 80%, which is the highest level over the years.

Looking ahead, with the rise in international crude oil prices, OPEC has gradually relaxed its production cuts, and international crude oil production has increased; the cold wave in Texas has gradually weakened, and US crude oil production affected by the cold storm will resume in the next few weeks. The factors supporting the continued upward trend of crude oil have weakened, and it is expected that there is little room for crude oil to continue to rise. From the perspective of supply and demand, a large number of PTA and ethylene glycol devices were still put into production in the first half of the year, and the increase in sales volume at rallies suppressed the upward space of future prices.

In terms of operation, the medium and long-term trades take profit on rallies, and pay attention to the movement of oil prices; intra-day interval trading, pay attention to the downstream inventory and device production trends.

1. Fundamental analysis

1. Upstream raw materials

In February, international oil prices continued to rise, with a cumulative increase of over 15% in February. The current pattern is relatively strong. Judging from the trend of the whole month, the trend at the beginning of the month was relatively flat, and the intraday volatility increased after the middle and late months, and the moving average pattern showed a continuous upward trend. On the supply side, Saudi Arabia, the world's largest oil exporter, said it will voluntarily reduce production by an additional 1 million barrels per day in February and March, boosting market confidence; the severe cold weather in Texas, the largest oil-producing state in the United States, has caused the state's oil fields to suspend production, according to related reports. This cold wave affects approximately 40% of the crude oil production in the United States. On the demand side, demand for heating in the United States in winter has increased, and rising oil prices have led to strong international buying, increased exports, and a decline in US API crude oil inventories. On the economic front, the House Budget Committee voted 19 votes in favor and 16 against on the 22nd Eastern Time, and passed the $1.9 trillion proposal announced by the Democratic Party last week. The market's expectations for the release of liquidity continue to heat up. In terms of geopolitics, the Director General of the International Atomic Energy Agency Grossi met with Iranian officials in Tehran on the 21st. The two sides reached an interim technical agreement of up to three months. The differences between the United States and Iran appeared to be bridged.

On the whole, OPEC+ continues to implement the production reduction agreement, but due to limited vaccine production capacity, the improvement of the global epidemic situation is relatively limited, the increase in crude oil demand continues to be unsatisfactory, and the follow-up OPEC plans to restore part of the output, and the pressure on the crude oil is gradually emerging. Follow-up attention, the results of the implementation of the Biden government's 1.9 trillion relief plan, and the development of the epidemic in Europe and the United States.

In February, the PX market's February gains showed a slow and rapid increase, and the price increase was basically synchronized with that of crude oil. In mid-to-late February, the earthquake in Japan caused a short shutdown of several PX installations, and the short shutdown of PX installations in Northeast Asia pushed up PX import quotations. As of February 23, the monthly quotation of (PX) CFR China was US$839.33/ton, an increase of 15% from the beginning of the month; FOB Korea’s quotation was US$822/ton, an increase of 16.36% from the beginning of the month. The rise of naphtha was more moderate than that of PX, and the price of PX-naphtha rose slightly from the beginning of the month. As of the 23rd (PX) FOB Korea-(Naphtha) CFR Japan reported 222.25 US dollars / ton, an increase of 32.89 US dollars from the low point at the beginning of the month. The February settlement price of Sinopec PX was 5,700 CNY/ton, an increase of 700 CNY/ton from January. Sinopec's February PX listed price was 5,610 CNY/ton, an increase of 420 CNY/ton from January. In December 2020, my country’s PX import volume for the month was 1,130,325.514 tons, and the cumulative import volume was 13,861,054.582 tons. The average import price in December was US$547.492/ton, and the cumulative import price was US$547.492/ton. The volume of imports increased by 12.492% month-on-month. A year-on-year decrease of 60.607%.

Ethylene ran smoothly at the beginning of the month and rose slightly at the end of the month. As of February 23, ethylene CFR Northeast Asia was quoted at US$981/ton, an increase of US$75 or 8.31% from the beginning of the month.

2. Supply status

The operating rate of the PTA plant in February decreased from the previous month. The average operating rate in February was around 85.63%, a decrease of 0.73% from the previous month. The output of PTA was 4.2 million tons, a decrease of 5.87% from the previous month. Except for Jialong Petrochemical, Pengwei Petrochemical, Tianjin Petrochemical, etc., which are still under long-term shutdown, most of the installations are in healthy operation. The February round of inspection capacity includes: Fuhai Chuang’s 4.5 million ton plant was overhauled on December 23 and restarted on January 21. The current load is 90% in operation; Yangzi Petrochemical’s 650,000 ton plant dropped to 80% on February 1, and the recovery time is to be determined. ; Jiangyin Hanbang's 2.2 million tons plant was shut down for maintenance on January 6, and the restart time is yet to be determined. A number of large-scale installations are scheduled to be overhauled next month, and Yisheng Hainan, Pengwei Petrochemical, and Hengli Petrochemical are scheduled to overhaul, with a total production capacity of 5.2 million tons. Fujian Baihong's device A line has produced qualified products on January 25, and the B line is planned to be put into production on February 3. The combined production capacity of the two production lines of the installation is 2.5 million tons/year, and the domestic production base is raised by about 0.42%. The second phase of Honggang Petrochemical was postponed to the second quarter, which involved a production capacity of 2.2 million tons per year. In addition, the amount of equipment maintenance losses increased in March, and the supply of PTA was slightly improved.

According to customs statistics, in December 2020, my country’s PTA import volume for the month was 18,479.73 tons, the import value of the month was US$8.0118 million, the average import price of the month was US$433.55/ton, and the cumulative average import price was US$459.40/ton. The import volume increased by 15.01% month-on-month. Import volume fell by 69.27% year-on-year. According to customs statistics, in December 2020, my country’s PTA export volume for the month was 139,702.51 tons, the month’s export value was 60.1412 million U.S. dollars, the average export price of the month was 430.49 U.S. dollars/ton, the export volume increased by 41.48% month-on-month, and the export volume increased by 130.90% year-on-year. Imports have decreased in price, and net imports have decreased compared with the previous month. This shows that my country's PTA is gradually getting rid of imports and the degree of dependence on imports has declined.

3. Supply of ethylene glycol

In February, the average domestic ethylene glycol operating load was about 64.91%, and the monthly output was about 857,500 tons. Among them, the starting load of non-coal ethylene glycol is about 70.13%, and the monthly output is about 586,200 tons; the starting load of coal-to-ethylene glycol is about 55.85%, and the monthly output is about 271,200 tons. (Except for the long-term shutdown of multiple plants in Yongjin Chemical Industry and Xinjiang Tianye’s plant, short-term repairs in February include: Xinhang Energy Plant was overhauled on January 2 and restarted on January 10; Tongliao Jinmei was overhauled on January 19, 1 It restarted on January 28; Dushanzi Petrochemical was overhauled on January 1, and the restart was pending; Fude Energy was overhauled on January 18 and restarted on January 31. As of now, the overhaul in February involves a production capacity of 3.96 million tons, and the monthly loss is estimated at 26.65. 10,000 tons, which does not include the small conversion of oil production and the reduction of EO, and the reduction of coal production. Subsequent installations plan to increase the load, and the installation of Jianyuan Coal Chemical and Hubei Sanning, which was postponed in early January, is expected to be put into operation next month. Ports As of February 22, 2021, the total ethylene glycol port inventory in East China’s main port area was 616,000 tons, and the port decline has slowed. Affected by the cold wave in the United States, the United States ethylene glycol plant has been shut down on a large scale, and the United States has 828,000 tons of MEG per year. The plant is still in shutdown, and its ethylene plant is scheduled to restart around March 8, and the start-up time for ethylene glycol will be in the middle of early March. The 360,000-ton/year MEG plant of Taiwan’s Nanya Line 2 has been restarted normally, and the load has started. 8-9 level. In February, the Asian ethylene glycol trend was strong, and the Asia-Europe price gap was repaired. The Middle East sources of goods were encouraged to deploy to Asia. The subsequent Asia-Europe re-export arbitrage phenomenon may decrease. In the future, the United States and Saudi Arabia will import sources of goods. It is expected to recover or continue to increase, and domestic production continues to rise. It is expected that the shortage of ethylene glycol supply in the second quarter will be alleviated.

In December 2020, my country’s ethylene glycol import volume for the month was 551,144.11 tons, and the cumulative import volume was 10548,005.28 tons. The monthly import value was 271,336,300 US dollars, and the cumulative import value was 498,592.40 million US dollars. The monthly average import price was 492.31 US dollars per ton. The average price was US$472.69/ton, the import volume fell 11.84% month-on-month, the import volume fell 40.16% year-on-year, and the cumulative import volume rose 5.92% from the same period last year.

4. Quotation status of contract goods

In terms of PTA contract cargo, Sinopec’s February PTA settlement price was 4,200 CNY/ton, an increase of 3,300 CNY/ton from the previous month’s settlement price. The listing price in March was 5,200 CNY/ton, an increase of 1,000 CNY/ton from the previous month.

In terms of ethylene glycol contract cargo, Sinopec’s February ethylene glycol settlement price was implemented at 5,500 CNY/ton, an increase of 790 CNY/ton from the previous month’s settlement price. The listing price of ethylene glycol was RMB 6,500/ton in March, an increase of RMB 1,300/ton from the previous month.

In February, the average monthly quotation of PTA East China market was 4103 CNY/ton, an increase of 231 CNY/ton from the previous month, and the average monthly quotation of ethylene glycol in the East China market was 5190 CNY/ton, an increase of 663 CNY/ton from the previous month. As of February 23, the monthly quotation of (PX) CFR China was US$839.33/ton, an increase of 15% from the beginning of the month; the average monthly processing difference of PTA in February was 327 CNY/ton, a decrease of 96 CNY/ton from the previous month. The gross profit of the coal-to-ethylene glycol market was 1511.5 CNY/ton; the gross profit of the methanol-to-ethylene glycol market was 365.27 CNY/ton; the gross profit of the ethylene-to-ethylene glycol market was US$113/ton; the gross profit of the naphtha-to-glycol market was 156.79 USD/ton.

5. Polyester and terminal status

In February, the output of the polyester industry in February was 3.93 million tons, down 14.34% month-on-month. February coincided with the Spring Festival, and the polyester operating rate was lowered. The lowest polyester load was recorded at 78.2% during the inter-junction period, which was a significant increase from last year. Overlapping the production of multiple installations last year, the actual output during the inter-junction reached a record high. Looking ahead, terminal weaving has already resumed work in an orderly manner, and the capacity load has increased to 62.32%. The summer order stocking has gradually begun. The follow-up polyester consumption is relatively optimistic. It is expected that the average polyester load in March is expected to return to 90%. In terms of categories, in February, boosted by the profit side, the load of staple fiber and filament decreased less, and the load of bottle flakes decreased slightly.

In mid-to-late February, affected by the rise in crude oil, the production and sales of downstream polyester products increased significantly, and the stock of staple fiber filaments was further reduced. However, due to the characteristics of multiple pick-ups in a single purchase by yarn mills and the undigested factors of the previous purchase inventory of forwarders, the actual social inventory of staple fiber is still relatively abundant. Crude oil prices continued to rise, and dual raw materials rose within a narrow range. As the pressure on the cost of polymerized PET increased, the quotations of some types of polyester filament yarns increased, and cash flow improved slightly. Because DTY increased little, cash flow showed a downward trend, as of February 26 Daily, FDY profit is recorded at 449.23 CNY/ton, POY is recorded at 149.23 CNY/ton, and DTY is recorded at 225 CNY/ton. In February, the market price of polyester bottle flakes in East China rose sharply. The average profit of polyester bottle flake manufacturers of polyester bottle flakes was 357.21 CNY/ton, a month-on-month profit reduction of 243.17 CNY/ton, and the profit margin was enlarged. In the future, summer is coming in the northern hemisphere, and the beverage consumption peak season, beverage manufacturers make inquiries and stock up, and bottle flake profits are expected to increase.

On the whole, the current production and sales of staple fiber filaments are increasing, and the terminal weaving operating rate is gradually picking up, and the demand for polyester raw materials is increasing. The market has better expectations for the follow-up "Golden Mountain and Silver Four", and spot traders have bought part of the supply, resulting in a relatively short supply in the market. The downstream demand is strong, and the raw materials of polyester enterprises have a replenishment demand, which is good for the prices of ethylene glycol and PTA.

2. Spread structure

From the basis trend chart, as of February 25, the PTA basis has strengthened from -160 to -130 in February, and the futures price gradually returned to the spot price. The basis of ethylene glycol strengthened sharply in February. Due to the reduction of imported supplies and the boost in cost, manufacturers were reluctant to sell. The spot supply was tight, and the spot rose was strong. The ethylene glycol spread strengthened from 210 to 530, and the load of domestic installations increased in the later period. It is recommended to sell and buy now. The PTA05-09 contract operates with first-line volatility centered on -90. At present, the forward supply is weak. It is recommended that the spread (-90) is near the positive intervention, and the target is (-60). Affected by the recent supply of ethylene glycol, the recent contract has a significant premium in the forward contract. The ethylene glycol-PTA cross-variety contract has risen sharply. Currently, it is under pressure near 1100. In the later stage, ethylene glycol is driven by profits to restart the volume. However, PTA has strong cost support in the state of meager profit. It is recommended that subsequent short EG and long TA operations are recommended.

3. Summary of views

In terms of raw materials, in February crude oil continued to hit a new high since the epidemic, boosted by OPEC+'s continued implementation of production cuts and Saudi Arabia's increased allocations and additional production cuts. However, the epidemic has not yet reached an inflection point, and the demand for crude oil has recovered slowly. There are market rumors that OPEC will open some production restrictions after April, and there is greater pressure on prices. PX and ethylene were affected by their own supply shortages. There was a rapid rise in mid-to-late February. The short-term shutdown device is currently being restarted, and the price increase is expected to slow down.

In terms of PTA supply, with the exception of a small number of device rounds, the operating rate in February remained nearly 90%. After Fujian Baihong was put into production, the output was stable, and the domestic production capacity was further increased. In March, Reignwood Petrochemical and Hengli Petrochemical planned to shut down for maintenance, and the second phase of Yisheng New Materials was postponed to the second quarter. The overall supply pressure has improved from the previous quarter. Regarding the supply of ethylene glycol, the starting load of ethylene glycol gradually increased to 70% in late February. The device was restarted in the early stage to increase the load, and part of the production capacity of EO plans to return to EG production. At the end of last year, the start-up equipment was postponed. Hubei Sanning and Chenzhou Chemicals successively started production to increase the load, and the domestic production load gradually increased, and the supply gap caused by the decline in external supply was gradually repaired.

In terms of demand, the operating rate of polyester decreased to 70% in February, and the decline of polyester during the Spring Festival will be higher than in previous years. In terms of terminals, as of February 25, the comprehensive operating rate of chemical fiber weaving in Jiangsu and Zhejiang was 62.23%, a decrease of about 20 percentage points from the previous month. Migrant workers returned to their hometown early, and the operating rate increased rapidly.

All in all, PTA's current processing profit is still near the cost profit and loss line, and the crude oil end cost support is relatively strong. The profit of some domestic routes of ethylene glycol has been corrected, and the domestic load is expected to continue to increase. The two will boost the price of crude oil in the next period to rise rapidly, and it is expected that the price will be slightly adjusted next month. From the perspective of the strength of the callback, the ethylene glycol callback is even worse, and you can pay attention to the trading opportunities of multiple PTA and empty ethylene glycol in the later period. Intraday trading focuses on changes in PTA operating rate and changes in ethylene glycol port inventory.