Since November last year, vaccine positive news has been frequent, and crude oil prices have continued to rise. As the cost line continues to move up, PTA futures prices bottomed out and rebounded. At the beginning of February, the highest value of PTA 2105 contract reached 4120 points, with a cumulative rebound of more than 700 points or 20% in more than two months.
Crude oil remains high
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Vaccine good news and gradually promote vaccination, so that the market confidence in anti epidemic doubled. Driven by the favorable situation of vaccines, crude oil prices reversed in a V-shape, rising more than 20% in the past three months. At present, more than 20 million doses of vaccines have been vaccinated in the United States and China. However, due to the bottleneck of vaccine production and transportation, the vaccination proportion in various countries is generally low.
It is gratifying that the number of new confirmed cases at home and abroad has dropped, and countries are still making efforts to increase the promotion of vaccines. With the positive benefit expectation of vaccines and the policy support of major economies, the IMF raised the global economic growth forecast by 0.9 percentage points in 2020 and 0.3 percentage points in 2021. China has taken the lead in recovering to the growth rate before the epidemic in the fourth quarter of 2020. It is predicted that China will record 8.1% GDP growth in 2021. We are optimistic about the future epidemic control and economic recovery. At the OPEC + meeting in January, Saudi Arabia announced that it would voluntarily reduce production by an additional 1 million barrels per day from February to march on the basis of quotas. Iraq also rarely proposed compensatory measures to reduce production. Crude oil prices are expected to remain firm.
PX profit recovery
Since 2019, the domestic PX industry has entered a period of rapid expansion, and the supply and demand of PX has gradually moved from tight balance to loose or even excess. The price difference of PX naphtha continued to decline, and it once dropped to about US $120 / T in the first ten days of October last year. The imported PX processing has been in a loss state for a long time. In this context, the domestic PX device shutdown maintenance increased, and the load decreased to less than 80%. PTA link benefited from the upstream profit, and the spot processing gap was maintained at about 450 yuan / ton.
With the release of new PTA production capacity of Dushan energy and Fujian Baihong, as well as the increase of domestic PTA load, the demand for PX has increased, and the profit of the industrial chain has been redistributed. By the end of January, PTA spot processing gap had been reduced to 256 yuan / ton, while PX naphtha oil price gap had been restored to 193 US dollars / ton.
The restart failure of the 1.6 million ton PX unit of Sinopec extends the shutdown for one month. It is estimated that the domestic PX production will shrink by about 120000 tons in February compared with the previous period, and the efforts to remove PX from the warehouse will be increased. In addition, the overhaul time of Qingdao Lidong 1 million ton PX plant was advanced from early April to middle and late March. Affected by the sudden change of PX device, PTA futures rebounded strongly for two consecutive trading days, and the price of CFR China PX soared by 21 US dollars per ton per day, which also reflects the market’s expectation of improving the supply and demand margin of PX.
Excess pressure increases
PTA industry entered the peak of production expansion again last year after capacity clearing in 2015-2016. Last year, 8.4 million tons of new domestic production capacity was added, with a growth rate of 16%. The commissioning of Fujian Baihong 2.5 million tons new plant was postponed to January February this year. This year, China plans to add 8.5 million tons of PTA capacity, mainly in the first quarter, and the capacity growth is expected to reach 14%. The planned new production capacity of downstream polyester is close to 5 million tons, and the growth rate of production capacity is estimated to be 8.3%, far lower than that of PX and PTA industries. Due to the relatively low growth rate of downstream polyester demand and the rapid shrinkage of demand caused by the epidemic situation, PTA social inventory has risen sharply since March last year, once close to 4 million tons. PTA spot has been in a discount state for a long time, and the basis can cover the risk-free arbitrage cost, and the stock exchange’s warehouse receipt volume has reached a record high.
Futures inventory plays the role of a reservoir, making part of the spot is locked in the disk, the spot market circulation source is reduced. According to the data, as of the end of January 2021, PTA social inventory was 3.67 million tons, an increase of 270000 tons compared with the end of October 2020; PTA warehouse receipts were 1.87 million, an increase of 1.15 million; factory inventory and in stock goods in Hong Kong were reduced by 440000 tons, which temporarily eased the excess pressure of the spot market to a certain extent, but the warehouse receipts will be cancelled in September, when the spot supply will face greater pressure.
Overall, the international oil price is expected to gradually rise, the supply and demand margin of PX is improved, and the PTA futures price oscillates upward under the guidance of cost. PTA is still in the production expansion cycle. Under the background of increasing pressure of excess supply and demand, the digestion of large amount of social inventory is relatively slow, or the space above the period price is restrained, especially the centralized cancellation of warehouse receipts in September will have a great impact on the spot market.
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