Domestic PTA market may maintain a near-strong, far-weak pattern

PTA futures have a high margin of safety

In early March, when they hit a new high this year, they stop rising and falling. Hengli PX new device put into operation has a greater impact on the long-term contract. Since March 5, the 5-9 price gap has accelerated to expand, and the expected value-added tax reduction has rapidly raised the 5-9 price gap to a maximum of 592 CNY/ton. With the monthly transfer of main warehouses and the realization of tax reduction effect, the price gap of 5-9 dropped sharply, reaching a minimum of 200 CNY/ton. At present, PX and PTA links are in the overhaul season. There are some signs of stabilization of the 5-9 price gap, and the 9-1 price gap has obviously expanded. In the medium and long term, considering the seasonal characteristics of the upper and middle reaches of the new capacity production plan and the demand side, the near-strong and far-weak pattern of PTA will continue.

Centralized overhaul supports PX price stabilization and rebound

Asia PX entered the period of centralized overhaul in the second quarter. China, Japan, Korea, India, Malaysia, Singapore and Thailand have plans for overhaul of a number of PX devices, involving a total capacity of 7.9 million tons per year. In addition, the unexpected reduction of short-term supply caused by device failure also arouses market sentiment. On April 7, Taiwanese Taihua PX plant was accidentally stopped due to explosion caused by the rupture of liquefied petroleum gas pipeline in the plant. The restart time has not yet been determined. On April 12, the PX unit of GS Company of Korea temporarily stopped for one week because of cooler failure. At present, the domestic PX load has dropped to 68.3%. The price of PX has risen by 40 US dollars/ton from the low point at the beginning of this month, and the corresponding PTA cost has risen by 200 RMB/ton. Later, with the implementation of PX unit maintenance plan and the high price of crude oil, the cost-side support is still strong.

Overhaul drives PTA into depot stage

The second quarter is also the stage of centralized overhaul of domestic PTA devices. In fact, since the middle and late March, domestic PTA equipment has gradually begun to repair. The PTA units planned to be repaired in China from April to May have a total capacity of more than 10 million tons per year, and the PTA supply is expected to be tightened. The downstream polyester cash flow performance is good, polyester load is maintained at more than 90%, PTA demand is still acceptable. The formation of supply-demand scissors gap may cause PTA market to enter the de-inventory stage. According to the current maintenance plan, PTA social inventory is expected to fall by more than 200,000 tons in April. The risk point is that at present PTA processing difference reaches a high level of 1000 CNY/ton. Driven by profits, PTA plant maintenance willingness or decline, resulting in maintenance output loss less than expected. In this context, PTA prices tend to be sensitive to changes in plant operation. With the acceleration of private refining, domestic PX production will enter a period of rapid growth from 2019. Five sets of PX devices are planned to be put into operation in China this year, involving a total capacity of 12.3 million tons per year. Excluding the devices scheduled to be put into operation at the end of the year and possibly delayed, it is conservatively estimated that the domestic new PX production capacity will reach 7.3 million tons per year in 2019, with a capacity growth rate of 49%. Among them, Hengli Dalian 225,000 tons/year plant was put into operation in March, another line is scheduled to be put into operation in June, Sinochem Hongrun 800,000 tons/year PX plant is scheduled to be commissioned in May and July, Hainan refinery 1 million tons/year plant is scheduled to be commissioned in June and September, and Dongying United Petrochemical Company 2 million tons/year plant is scheduled to be commissioned in the fourth quarter. Considering the stable operation of the new plant, it is expected that the second half of the year will face greater pressure from intensive production and release of new output, which will have a greater impact on the PTA far-month contract.

According to the current planning, in 2020 and the next few years, the domestic planned additional PX production capacity will be more than 10 million tons/year, and the dependence on imports of PX will gradually decline in the future. Meanwhile, the price gap between PX and naphtha may continue to shrink.

PTA industry has gone through the process of capacity removal in recent years, and the market supply and demand structure has improved. In 2019, the new capacity of Sichuan Sheng reached 1 million tons per year, and the capacity growth rate was only 2%. But starting from 2020, domestic PTA capacity growth will accelerate again.

Conclusion 

From a comprehensive point of view, the second quarter of PX and PTA links centralized maintenance, strengthening cost support and improving supply and demand structure are good for PTA futures price, especially in recent months, while the expected production of PX and PTA new devices has a greater impact on long-term contracts. In the medium and long term, PTA market may maintain a near-strong or far-weak pattern. However, the strength-weakness relationship of stages will be affected by many factors, such as unplanned changes in plant operation, seasonal demand, macro-level factors and market funds. Therefore, rolling participation in PTA bushing has a high margin of safety.