How does the uncertainty of the epidemic affect the polyester industry chain?

At the beginning of 2020, the outbreak of new coronavirus broke the original market expectation. The epidemic spread to many countries in China and even in the world with the rapid speed of Spring Festival. The new virus is similar to and different from SARS in 2003. We try to analyze the impact of SARS on polyester industry chain from the experience of SARS, the performance of outer disk and the understanding of this kind of virus. During the peak period of SARS, the index of various industries did show a low point for a period of time before the emergence of the virus. It can be seen that large-scale infectious diseases do have a certain negative impact on the economy. At the end of 2002, the SARS epidemic occurred in Guangdong Province, which also experienced the Spring Festival tide, but the growth rate of the number of people infected was far lower than today. Three research reports from different institutions of higher learning set up different models to estimate the basic infection number of the new coronavirus, and obtained 3.8, 2.6 and 6.47 results respectively. Compared with the basic infection number of 0.4 after isolation, there is no doubt that the infectivity of the new coronavirus is higher than that of the SARS base.

As of January 30, 2020, the number of new coronavirus confirmed has far exceeded the number of SARS infected people, and still presents an outbreak pattern. In terms of scale, the scale of the new coronavirus will be larger than that in 2003, and due to the arrival of the peak of return work, it is expected to usher in a new wave of peak in early February. Like SARS in 2003, the epidemic will probably disappear after a few months, rather than be cured. From the time point of view, the outbreak of SARS was in the spring. At that time, China's economic recovery had been stabilized for a year, but this outbreak was ahead of schedule, and China had just ushered in the beginning of economic recovery, so the impact may be more obvious than before. During the Spring Festival holiday, the foreign market mainly focuses on the performance of crude oil during the Spring Festival. It can be seen that the performance of crude oil futures almost follows the development of the epidemic. Since January 21, both American oil and cloth oil have fallen continuously, with a daily decline of more than 2% for many times. Only 28 days saw a rebound due to the inflection point of the number of newly confirmed cases. Crude oil is the cost end of PTA and glycol.

In the case of cost collapse, the approximate rate of downstream chemicals, especially PTA with no prominent fundamental contradiction, will still follow the cost end. It is expected that after the opening of trading on February 3, the overall trend of chemicals will first fall with the trend of crude oil during the Spring Festival, and then turn around or slightly rebound with the epidemic again. The impact of the epidemic on the polyester industry chain is more in two aspects: the inhibition of terminal consumption and the delay of downstream construction leading to the delay of demand recovery.

First, as a labor-intensive industry, the terminal textile industry is mostly closed for holidays during the Spring Festival, and the operating rates of Jiangsu and Zhejiang looms and texturing are reduced to 10% and below. Due to the serious epidemic situation, Shanghai, Zhejiang and many other places have adjusted the return to work time to February 9, which is about 10 days later than the original holiday time. According to the return to work schedule of previous years, the operation rate can reach 30% about 7-10 days after the return to work. This year's Spring Festival is 10 days ahead of that of the 19th year. The time for Jiangsu and Zhejiang loom operating rate to recover to more than 30% is about the same as last year. After the middle of February, however, due to the impact of the epidemic situation on the clothing market, or a short-term downturn will continue, the further improvement of loom operating rate may be hindered. That means: usually half a month from 30% to more than 70%, this year may be due to poor sales in the textile clothing market and elongate to one month or more.

Secondly, due to the poor prediction of the start-up rate of terminal looms, the demand for polyester products may be further delayed, resulting in the later than expected rise of polyester operating rate, and the price of polyester products may fall significantly. The operating rate of polyester in the previous week was 77.7%, and the operating rate during the Spring Festival holiday should be less than 75%. The upstream raw materials of polyester are mostly integrated and scale intensive production mode, and the upstream raw materials production is less affected by the epidemic situation. The deviation between the supply end and the demand end will increase the contradiction between supply and demand, resulting in the stock of raw materials exceeding the expected accumulation. PTA, glycol prices will be suppressed in the short term. Once the epidemic is under control, the prices of various products in the polyester industry chain will have a rebound. About the duration of the impact: it is determined that the epidemic will last for at least several months. In March of the first quarter and the second quarter, whether or not there is a turning point of the epidemic, the consumption and export of the terminal will be affected.

The impact of optimistic estimates continues to the end of the first half of the year, while pessimistic estimates may continue to the second half of the year. If the polyester operation rate is delayed, it may force some small and medium-sized raw material factories to reduce the load and production. In the past two weeks, the average operating rate was about 82%, and in the second half of the year, the average operating rate of polyester reached 92%. Affected by the epidemic situation, assuming that the operating rate remained at a low level of 75%, polyester production decreased by about 170000 tons in February, corresponding to a decrease of 150000 tons in PTA demand and 60000 tons in glycol demand. Every month after the outbreak, polyester production will be affected by about 800000 tons, PTA demand will be reduced by about 690000 tons, glycol demand will be reduced by about 270000 tons. Impact on PTA: since December 2019, due to the relatively low processing cost, the spot prices of PTA disk and internal market almost follow the trend of crude oil and PX prices. After the end of January, PTA processing difference has improved greatly, but the contradiction between the cost side and the demand side is more certain to be the cost side. International oil price fell continuously in the demand panic, and PX also fell from $792 on 23 to $764 on January 31, down 3.5% a week.

According to the PX CFR price on January 31, the disk processing fee is 650 yuan, and the main contract price of pta2005 only considers the cost end at about 4700. It is expected that the recovery time of downstream demand will be prolonged, or it will reach a new low. Impact on glycol: glycol fundamentals were good years ago, and this epidemic may become an opportunity for its supply and demand fundamentals to turn from strong to weak. The accumulation of the Spring Festival is inevitable, but the recovery of downstream polyester operating rate is delayed, and the rebound expected by the market may be delayed due to the epidemic. Traffic restrictions and other reasons will also increase the degree of inventory accumulation. The price of Northeast Asian ethylene is basically stable during holidays, and the cost support of ethylene glycol is stronger than PTA.