PX industry chain profit reshuffle

PX production capacity is released centrally, prices are under pressure, and supply patterns have changed.

In recent years, the global PX industry chain pattern has undergone significant changes, mainly due to the substantial expansion of China’s production capacity. Among them, 80% of PX capacity increase comes from China, and China’s PX production capacity has increased significantly. According to statistics, PX accounts for 27% of the world in 2016-2018, and is about 37% between 2019 and 2020. With the acceleration of the domestic PX production in recent years, China’s import dependence will be slightly reduced, and the past days of PX high dependence will be gone forever. Subsequently gradually break the pricing model of countries such as Korea and Japan, profits will be transmitted downstream from PX to PTA, and the downstream textile and garment industry.

From 2016 to 2018, the apparent consumption of PX increased from 21,740,800 tons to 26.05 million tons, an increase of 19.81%, and the self-sufficiency rate was only 38.84%. The problem of external dependence was relatively prominent, and the import quantity was 15.9051 million tons. As of the second half of 2019, the PX supply and demand tightening pattern has been greatly improved, the self-sufficiency rate has reached 69.7%, the Japanese and Korean pricing models have been broken, and the PX price has fluctuated at a low level.

Profit has gradually shifted from upstream PX-naphtha to PTA-PX

From the 2018 to 2019 PX-naphtha crack spread, from the end of August 2018, the highest price of 712 US dollars/ton fell to 259 US dollars/ton at the end of 2019, the decline was close to 63.6%. In 2018, the PTA-PX link price difference is calculated according to the CFR Taiwan (China) PX middle price and the CCFEI price index in the PTA outer disk price. The average PTA-PX spread in 2019 is maintained at -147 USD/ton. The average price difference in 2018 remained at -201 USD/ton, and the market focus shifted to 54 USD/ton. The profit has been moved from PX-naphtha down to PTA-PX, making the PTA-PX spread wide.

Considering that the downstream demand is not strong overall this year, the downstream polyester product prices are under downward pressure, and the overall profit margin is relatively limited. However, in the later stage, the low cost of the integrated refinery in 2020 will further depress the PX price, and there is the possibility of further downward conduction in the later stage.