PTA: New production capacity is expected to reduce processing fees

In the second half of the year, the pressure of PX production in China is gradually fulfilled, but the accumulation rate of PX balance sheet in Asia is still controllable. It is expected that the PTA balance sheet will usher in an inventory turning point in July, from de-stocking into the accumulation cycle. Crude oil prices continue to push up the cost of PTA.

PX increased new capacity in the second half of the year

Starting in July, the pressure of PX's new production capacity has been gradually fulfilled. This year, the global new PX production capacity is about 5.85 million tons, corresponding to the global PX production capacity growth rate of about 7.6%, while the Chinese PX production capacity growth rate is 17%. From the perspective of the pace of production, China's new PX capacity is 1# and 2# of the second phase of Zhejiang Petrochemical, which will be realized in July and the fourth quarter respectively. The PX maintenance plan in the second half of the year was less than the same period last year. The currently announced PX maintenance volume has been significantly reduced compared to the same period last year. Starting in July, the PX maintenance volume will rapidly shrink.

In the case of a mismatch between PX and PTA's new capacity, PX gross profit rebounded rapidly in the first half of the year. The new PX production capacity only began to materialize in July, and the increase in supply was realized late; while the new PTA production capacity has been cashed in by Fujian Baihong 2.5 million tons in January and 2.5 million tons in the second phase of Honggang Petrochemical in February, promoting PX processing The fee has rapidly increased from a minimum of US$140/ton to around US$280/ton.

Starting from May, the PX processing fee quickly dropped to US$200-230/ton, and the PX production expectation of Zhejiang Petrochemical in July and the subsequent PX accumulation cycle were traded in advance.

In terms of PX demand in Asia, it is assumed that there will be little subsequent changes in the PTA operating rate in Japan and South Korea. The main change comes from the estimated PTA production in China, including the expected production of 2 sets of 3.3 million tons of PTA from Yisheng New Materials in July and September. If PTA’s new capacity, Yisheng New Material 2#, does not meet expectations, the PX accumulation rate may accelerate from August.

PTA's new capacity is gradually realized

The second round of PTA new capacity pressure will begin to materialize in July. This year's new production capacity is about 11.6 million tons, and the 2.5 million tons of Baihong and the 2.5 million tons of Honggang Phase II have all been realized at the beginning of the year. In addition, two sets of 3.3 million tons of Yisheng New Materials production capacity will be realized in the second half of the year, of which Yisheng New Materials 1# 3.3 million tons, one set of reactors has been commissioned on June 20, and three sets of reactors are scheduled to start up by the end of June. Pay attention to the specific time when the subsequent 2#3.3 million tons device will be put into production.

In the second quarter, the maintenance of PTA devices increased significantly year-on-year. One was the increase in long-stop devices, and the other was the reduction in production of major factories to insure their prices. In late June, Hengli Yisheng once again reduced its contract volume. Hengli’s July contract volume was reduced by 50%, Yisheng Petrochemical’s July contract volume was reduced by 30%, and the PTA processing fee returned to more than 500 CNY/ton. It is estimated that the PTA processing fee will hover in the range of 350-500 CNY/ton for a long time.

Terminal demand is constantly repaired

This year's terminal growth rate is acceptable year-on-year. The growth rate of polyester production from January to May was 22%, but the terminal growth rate was higher than the growth rate of polyester production. Therefore, this year's grey fabric inventory was lower than in previous years. In the second half of the year, the planned production of polyester is sufficient. 2.4 million tons have been cashed from January to May, and 4.26 million tons are still waiting to be cashed in the second half. The third quarter was 2.07 million tons and the fourth quarter was 2.18 million tons.

The terminal loom began to lower the negative at high position. In the second quarter, the growth rate of looms and texturing remained high, but the new orders for domestic and foreign trade were still average, and there was no obvious growth beyond expectations. Although the pressure on grey cloth inventory has declined year-on-year, the pressure on the month-on-month basis has gradually picked up. Under the general order background, the terminal factories are generally willing to purchase polyester, and the raw material stocking days are only at a low level of 1-2 weeks, which leads to greater pressure on the polyester filament factory warehouse. Therefore, the sales strategy of the filament factory this year is pulsed. Reduce price promotions to shift inventory pressure. Foreign trade orders improved slightly in late June, and attention was paid to follow-up improvements. The polyester operating rate is still operating at an average of over 91%, which is at a high level year-on-year. The filament operating rate remained at a high level year-on-year. With the shrinking of filament profits, there is limited room for subsequent price cuts and promotions. Therefore, the filament operating rate may be compressed in the long-term.

In summary, in the context of strong crude oil prices, it is estimated that the naphtha processing fee will be US$100/ton, the PX processing fee will be US$200/ton, and the PTA processing fee will be 400 CNY/ton. Assuming that Brent crude oil is 75-90 US dollars/barrel, the absolute price of PTA is 4580-5120 CNY/ton. If the demand for clothing in the second half of the year grows faster than expected, or if the PTA device reduces production or fails more than expected, the PTA processing fee will increase by about 150 CNY/ton, and the PTA price will correspond to 4730-5270 CNY/ton.