How will the PTA price falling to the bottom of history be interpreted in 2021?

In 2020, PTA futures prices fell to record lows. Looking forward to 2021, it is expected that the contradiction between PTA supply and demand will further intensify, and the industry will enter an era of low processing fees, when the cost-side guidance on the absolute price of PTA will increase.

PX-NAP spread or repair

PX-NAP spread is the embodiment of PX supply and demand strength and industry bargaining power. From January to November 2020, the domestic new PX production capacity will be 5 million tons/year, including two sets of 4 million tons/year PX equipment in Zhejiang Petrochemical and 1 million tons/year PX equipment in Dongying Weilian Petrochemical. With the increase in the industry's capacity base, the domestic PX supply has risen sharply while the operating rate has remained stable. From January to November, the domestic PX output was 17.98 million tons, an increase of 4.73 million tons from the same period last year, a year-on-year increase of 35.75%, while the PTA output increased by 10.16%. The demand side growth rate was slower than the supply side growth rate. PX social inventory continued to rise. The phenomenon of regional expansion is serious, and the PX-NAP price difference has been compressed from US$280/ton at the beginning of the year to US$160/ton now. In 2021, the PX industry will add 5.8 million tons/year of production capacity, including the 800,000 tons/year PX device of Sinochem Quanzhou and the two sets of 5 million tons/year PX device of Zhejiang Petrochemical. The downstream PTA is expected to add 11.5 million tons/year of production capacity, corresponding to an increase of 7.53 million tons/year of PX demand. Considering that the PX and PTA production schedules are relatively synchronized, for PX, its demand side increment is greater than the supply side increment. PX supply and demand side is expected to usher in a phased improvement, and the PX-NAP spread will also be repaired.

　　At the same time, oil prices may promote a repair rebound in PX prices. The PX price is essentially determined by the crude oil price and the PX-NAP spread. In 2020, affected by the epidemic, the center of gravity of international oil prices will drop significantly. In 2021, the global economy is expected to recover slowly. Coupled with the OPEC+ production cut, the international oil price center may move up further. Therefore, with the recovery of crude oil prices and the improvement of PX supply and demand, PX prices are expected to usher in a repairable rebound.

PTA supply will continue to increase

 PTA supply will continue to increase. From January to November 2020, PTA will add 8.4 million tons/year of production capacity, with a total production capacity of 57.03 million tons/year. In 2021, the PTA industry is expected to add 11.5 million tons/year of production capacity, including Fujian Baihong 2.4 million tons/year, Honggang Petrochemical 2.5 million tons/year, and Yisheng Ningbo Petrochemical with a total of 6.6 million tons/year PTA Device. From the perspective of production time, the production time of PTA devices will be concentrated in the first half of next year. If the above production capacity is successfully put into operation, the PTA industry capacity growth rate will reach 20% in 2021. Although the operating rate of the PTA industry may decline due to the expected impact of the compression of processing fees, the PTA supply pressure is still very large.

　　The growth rate of polyester production is not as fast as the growth rate of PTA supply. From January to November 2020, polyester added 4.49 million tons/year of production capacity, and the launch of new production capacity went smoothly, exceeding market expectations. In 2021, under the "dual cycle" development pattern, the domestic economy will further recover, and domestic demand in the textile and apparel industry will slowly improve. In addition, the signing of RCEP will also enhance my country's export competitiveness of chemical synthetic fibers. At present, the expansion of polyester production capacity is mainly based on the integrated configuration of upstream and downstream industry leaders. The company has a strong overall anti-risk ability and a higher tolerance for high inventories and low profits. It is expected that the polyester production capacity will be relatively smooth next year. In 2021, the polyester industry is expected to add 6.355 million tons/year of production capacity, and the capacity growth rate will reach 10.2%.

　　 PTA social inventory will continue to accumulate. At the beginning of 2020, the PTA social inventory was 1.334 million tons. During the year, the PTA industry's production capacity expanded rapidly, but downstream demand was insufficient. As of December 4, PTA social stocks rose to 4.156 million tons, an increase of 2.822 million tons from the beginning of the year. According to the PTA and polyester capacity release plan, the growth rate of PTA supply in 2021 will far exceed the growth rate of demand, and the oversupply will further intensify, and the social inventory may approach 5 million tons during the year.

　　 PX-PTA-polyester industry chain profits will be redistributed. In 2020, the overall profit level of the PX-PTA-polyester industry chain will drop sharply. The profits are mainly concentrated in the PTA industry, while the profits of the PX and polyester industries have been greatly compressed. In 2021, in the PX-PTA-polyester industry chain, the contradiction between PTA supply and demand will be the most prominent, followed by PX and polyester. The profits of the industrial chain will also be redistributed, and the PTA industry will enter the era of low processing fees, and the processing fees transferred from it will flow into the PX and polyester markets with relatively good supply and demand. With reference to the previous round of the PTA industry cycle, it is expected that the PTA processing fee will fall back to the level of the same period in 2015-2016, and the overall processing fee operating range will be 300-500 CNY/ton.

　　 In short, in 2021, the oversupply of PTA will further intensify, and the processing fees of the PTA industry will also be compressed. With low processing fees, the cost-side guidance on the absolute price of PTA will be further enhanced.