The restart of old equipment will change the current supply pattern of the PTA industry
At the beginning of 2015, the growth rate of PTA production capacity began to slow down. In 2016, only Hanbang Petrochemical’s new 2.2 million tons/year device was put into operation, with a capacity growth rate of 4.7%. In terms of distribution, PTA production capacity is highly concentrated, mainly in Liaoning, Zhejiang, Jiangsu and Fujian, accounting for 84% of the total domestic PTA production capacity.
In addition, in 2015, the scale of long-term parking devices in the PTA industry expanded to 12.8 million tons; in 2016, the production capacity of parking devices increased to 13.4 million tons. Large-scale parking has changed the original production capacity layout of the PTA industry. Xianglu Petrochemical has temporarily withdrawn from the ranks of mainstream suppliers, and the proportion of production capacity in Fujian has dropped significantly. The commissioning of large-scale Hanbang Petrochemical equipment has increased the proportion of production capacity in Jiangsu, and the concentration of the PTA industry has increased.
As of now, the actual production capacity of the PTA industry is 35.87 million tons. In 2017, Xianglu Petrochemical, Far East Petrochemical, and Pengwei Petrochemical all have plans to restart their parking devices, with a total production capacity of 6.8 million tons. If all the above-mentioned devices are restarted, the actual production capacity of the PTA industry in 2017 will reach 43.27 million tons. With consumption growth limited, PTA supply pressure is obvious.
The polyester industry cannot fully absorb the PTA increase from the restart of old equipment
Examining the supply and demand performance of PTA-polyester, it can be found that there was not much new PTA production capacity in 2016, and PTA-polyester showed a weak balance relationship.
Judging from the known production status of the polyester industry in 2017, the total scale of the equipment is 5.18 million tons. Among them, 2.08 million tons of filament yarn and bottle flake equipment are mostly postponed from the planned production in 2016.
From the analysis of polyester profit, inventory and performance in the downstream terminal consumption field, the impetus for the filament device to be put into production is greater than that of the bottle flake device. This is because, firstly, the profit of filament yarn is better than that of bottle flakes, especially after July 2016, driven by the substantial improvement in profits, the enthusiasm for putting new filament yarn equipment into production is high; secondly, the stock of filament yarn is at a low level , although it rebounded in January 2017 due to the Spring Festival factors, it was lower than the same period in 2016, and low inventory is conducive to the industry maintaining a high operating rate; thirdly, although the cumulative fixed asset investment completion amount of textile and clothing declined year-on-year, However, compared with the negative growth trend of the wine, beverage and refined tea manufacturing industries, it still has a comparative advantage.
Assuming that the 2.08 million-ton filament device is successfully put into operation, it can drive 1.79 million tons of PTA consumption; assuming that the 3.1 million-ton bottle flake device is fully put into operation, it can increase PTA consumption by 2.66 million tons. However, even if all polyester plants are put into production, under the most optimistic scenario, the increase of 6.8 million tons of PTA cannot be fully digested, and the market will still be in surplus with 2.35 million tons of PTA.
It can be seen that the restart of the old PTA equipment will return the PTA market to a situation of loose supply. The growth rate of downstream demand is limited, and it is difficult for the market to digest the excess supply. The possible consequences are: first, PTA prices will be under pressure to decline, and processing profits will be further compressed; second, the operating rate of the PTA industry will be reduced, and high-cost small devices will be shut down. Risks; thirdly, PTA futures market headroom pressure has increased, and inventories continue to rise. Therefore, the restart of old PTA equipment in 2017 lacks the support of downstream consumption. Far East Petrochemical’s 1.4 million tons/year units and Pengwei Petrochemical’s 900,000 tons/year units are expected to restart. However, there is greater uncertainty about the restart of Xianglu Petrochemical units. The actual impact of unit restarts will appear in the second half of 2017.
PX supply cannot meet the raw material demand for restarting all old equipment
Since 2013, the growth rate of domestic PX production capacity has continued to decline. In 2016, no new equipment was put into production, and the total PX production capacity remained at 14.4 million tons. Based on the PX output of 9.91 million tons in 2016, the operating rate of the PX industry was 68.8%, an increase of 4 percentage points from 2015. Domestic PX supply is still dominated by imports, accounting for 55%, a slight decrease of 1 percentage point from 2015.
If the old PTA equipment is restarted, attention needs to be paid to whether the PX supply can meet the PTA production consumption. From January to November 2016, 77.6% of domestically imported PX came from South Korea, Japan and Taiwan. The sources of imported goods are all in Asia, and the import volume of ocean-going goods is not large. The growth of PX supply in Asia has the most important impact on domestic PTA demand. .
In 2016, there was not much new PX supply from major import sources. In 2017, new supply mainly came fromTrusted from India. The company’s 2.2 million to 2.3 million tons/year device was put into operation at the end of 2016, but there was no actual output. The specific output is expected to be around March 2017. Calculated based on the fact that the production of 1 ton of PTA requires 0.655 tons of PX and the PTA industry plans to restart 6.8 million tons/year of old equipment, the amount of PX consumed is 4.454 million tons. The new supply of PX may not be able to meet all the restart requirements of old devices, and can only meet the demand for PX after the restart of some devices.
In addition to the restart of old PTA equipment in the mainland, Taiwan Yadong Petrochemical will also release 1.1 million tons of PTA production capacity in 2017. To meet the normal production of this part of the device, 2.227 million tons of PX are needed. In addition, CCF information shows that in 2017, the PTA industry also had new installations of 1.2 million tons from India’s JBF and 1.2 million tons from the United States’ M&G, while PX only had 1.34 million tons of new installations from Saudi Arabia and 700,000 tons from Vietnam. Judging from the production plans of the above-mentioned devices, PX-PTA can maintain a weak balance between supply and demand.
However, considering the production of the 4.5 million tons/year PTA unit of Xianglu Petrochemical and the 2.2 million tons/year second phase of Jiaxing Petrochemical, the supply of PX will be tight.
To sum up, the restart of old PTA equipment in 2017 lacked support from downstream consumption on the one hand, and the actual operation of the equipment needs to be further tracked; on the other hand, PX supply can only meet the demand for raw materials for normal production of some equipment. Therefore, the pressure on the market from the restart of old PTA equipment may be less than expected. In addition, seasonal factors, such as the centralized maintenance of PX, PTA, and polyester equipment, will also have an impact on the upstream and downstream supply and demand in stages.
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