Driven by the cost of crude oil, PTA’s own production reduction and the positive impact of destocking driven by the improvement of supply and demand, the domestic PTA spot market showed an upward trend in 2021. According to the price monitoring of business society, the average price of domestic spot market was 4963 yuan / ton as of December 31, 2021, up 36.76% compared with January 1, 2021. The highest point in the year was 5543 yuan / ton on October 11, and the lowest point was 3592 yuan / ton on January 1.
The annual price trend can be roughly divided into three stages:
From January to July, unilateral shocks rose. The international oil price continues to rise, and the cost side has become the core factor driving the market upward; In addition, with the high year-on-year growth of terminal textile and garment export and domestic sales, the downstream polyester and weaving start-up continued to operate at a high level, and the demand side performed better. At the same time, the frequent maintenance of PTA factory after March, the tightening of spot supply from mainstream suppliers, the arrival of typhoon at the end of July and the port closure led to the continuous improvement of PTA supply and demand side. During this period, PTA realized de inventory for six consecutive months.
After a brief correction of PTA following the oil price in August, PTA resumed its upward trend in late September, boosted by cost support and reduced supply. In early October, Jiaxing petrochemical, Hengli petrochemical and yishanhua shut down a total of 10 million tons of PTA units, resulting in the operation rate of PTA industry once falling to about 60%, resulting in the continuous rise of PTA price, which reached a new high in the year on October 11 and near the high in the past two years.
Since late October, due to the impact of power rationing in main production areas such as Jiangsu and Zhejiang, the start of polyester and weaving in the downstream has declined significantly, and the demand side is significantly weaker than that in the first half of the year. This year’s peak season performance was lower than expected, and the performance of new orders received by weaving enterprises was dismal. With the gradual relaxation of the dual control of energy consumption and production restriction, the price of superimposed raw materials fell sharply, and the terminal enterprises placed an order to wait and see. Domestic demand stalls in advance and external demand is delayed. Although the PTA plant stopped and reduced production, it did not last long, and the market supply and demand weakened and accumulated again. Near the end of the year, although restrained by demand, PTA prices stopped falling and showed a slight recovery under the strong impetus of crude oil.
After PTA prices hit a record low in April 2020 and rebounded to the bottom in 2021, where will 2022 go? Will it continue to warm up or fall back?
Overcapacity and supply pressure remain
In 2021, a total of 8.2 million tons of domestic PTA capacity will be added, while PTA will still be put into operation in 2022. It is expected that 14 million tons of new capacity will be put into operation in the whole year. The downstream polyester is planned to increase the production capacity by 7.1 million tons, but the unit is numerous and scattered, and the concentration is lower than that of the upstream raw materials, so there is a large difference between the plan and the actual progress. From the actual production of polyester in recent three years, it is basically stable at the level of 4 million tons, which is far lower than the growth rate of upstream PTA. Therefore, the PTA supply side will be more severe, and the old devices will lose competitiveness in the future. In 2020 and 2021, the parking capacity will be increased by 2.19 million tons and 5.44 million tons respectively. The market pattern will be redistributed, and the degree of PTA overcapacity will become more and more serious.
Looking at the inventory, at the beginning of 2021, especially in January and February, the downstream polyester enterprises stopped production and had holidays due to the Spring Festival holiday, which made the PTA inventory accumulate rapidly during this period; In March, as downstream enterprises gradually resumed production and the market was optimistic about future demand and actively purchased raw materials, PTA social inventory entered a continuous downward trend, and the inventory fell all the way from the peak of more than 4 million tons to around 3 million tons; Since May, the domestic PTA social inventory has fluctuated slightly around 3 million tons. By the end of 2021, the PTA social inventory is about 3.5 million tons, but it is still high in recent years.
The cost side has a high probability of bad downlink drive
In 2021, crude oil has made rapid progress and surged to a new high in recent years. In 2021, WTI’s overall annual increase reached 55.39%, and Brent’s crude oil increased by 50.65%. The core logic of the rise in oil prices in 2021 is basically highly related to the evolution trend of the epidemic. In addition, under the macro background of inflation expectations, supply tightening and economic recovery also provide impetus for the rise of oil prices. In 2022, the overall supply side of the crude oil market is likely to be negative, with strong downward drive. The global crude oil supply will continue to grow and close to the level before the epidemic. The negotiations on the Iranian nuclear agreement are restarted, Iranian crude oil may return to the market, OPEC (OPEC) also normally implements the production increase plan, and multinational countries release strategic stocks, resulting in marginal increase in supply, which may lead to greater supply pressure. The Omicron mutant has a potential impact on crude oil demand, and the global crude oil supply and demand pattern has weakened.
In 2021, driven by the continuous rise of crude oil price and the rise of external market price, the price trend of domestic PX market increased sharply. The average price at the beginning of the year was 4700 yuan / ton and the average price at the end of the year was 6700 yuan / ton, with an increase of 42.55% for the whole year. However, it is unlikely to continue to rise in 2022. It is estimated that the domestic planned new capacity will exceed 14 million tons in 2022, and the domestic import volume will be greatly reduced. Although the domestic supply and demand has improved, the overall supply of PX in Asia has been surplus. There is great pressure on PX exporting countries such as Japan and South Korea. It is very likely to sell profits to China and compete with domestic enterprises. The PX production loss will continue, and negative profits will become the norm.
The recovery trend of weak terminal demand is expected to continue
In 2021, the average operating rate of comprehensive start-up of Jiangsu and Zhejiang looms was 69%, an increase of 8 percentage points over 2020. The orders in the first half of the year were good, at the historical level in the same period, and the orders in the second half of the year were general. With the superposition of the power limitation in some areas of Jiangsu and Zhejiang, the weaving processing rate remained weak as a whole.
From the perspective of the terminal textile industry, according to the data of the National Bureau of statistics, from January to November 2021, the retail sales of clothing, shoes and hats, knitwear and textile products reached 1236.3 billion yuan, a year-on-year increase of 14.9%. The domestic demand for textiles and clothing market has recovered steadily, mainly due to the low base effect in 2020. In the first half of 2021, domestic end textile consumption maintained a rapid growth, but the sales growth rate dropped significantly from July and August, continued to decline for many months, and some months were lower than the same period last year. Overall, the domestic demand market shows a weak recovery, and the future trend is expected to continue.
In terms of exports, China’s textile and clothing exports in 2021 reached 315.47 billion US dollars, a year-on-year increase of 8.4%, surpassing 2014, reaching a record high and achieving “beyond expectation” growth. The reason for the outstanding export performance still lies in the epidemic situation, and the domestic continues to supplement the lack of international supply. A round of replenishment has been carried out overseas in 2021, but it has not returned to the level before the epidemic. It is expected that in 2022, especially in some Southeast Asian countries, the supply will gradually recover, the substitution effect will weaken, and the domestic textile and garment exports will face a decline.
Based on the above, Xia Ting, an analyst of business society, believes that the short-term PTA will still run strong due to the upward boost of crude oil. According to the 730 moving average chart of business club, since December 12, 2021, the 7-day moving average has crossed the 30-day moving average to start the upward trend. At present, the two moving averages continue to rise in the same direction. It is estimated on January 22, 2022 that the probability of operation situation change (i.e. the 7-day moving average crosses the 30-day moving average) in the next 7 days is 24.57%. In the medium and long term, the crude oil supply is bad and the cost support will decline. In addition, all products of PTA industry are still in the production capacity expansion cycle, the expansion speed of the upstream is much faster than that of the downstream, and the end demand continues to grow restoratively. Therefore, the PTA supply pressure will not decrease in 2022, and the overall price trend is weak.