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Rapid callback of polyester raw materials and overall positive development of terminal consumption
2023/8/22
[Introduction to the Industrial Chain]
Market Overview
The polyester industry chain is closely related to the national economy and people's livelihood, ranging from clothing and textiles, non-woven fabrics, filling materials, to yarns, sewing threads, etc.
PTA is a lower end product of petroleum, which undergoes a certain process to produce naphtha (also known as light gasoline). MX (mixed xylene) is extracted from the naphtha, and then PX (para xylene) is extracted. PTA uses PX (formula 65% -67%) as raw material, acetic acid as solvent, and air oxidation (oxygen 35% -33%) under the action of a catalyst to generate crude terephthalic acid. Then, the crude terephthalic acid is hydrotreated to remove impurities, and then crystallized, separated, and dried to obtain the refined terephthalic acid product, which is the PTA finished product.
The production process of ethylene glycol mainly includes ethylene method and oxalate ester method. Among them, the ethylene method can be divided into petroleum ethylene method, ethane ethylene method, and MTO ethylene method according to its different raw material processes. The naphtha ethylene method is currently the mainstream production method used in China, with about 67% of the world's ethylene glycol produced using the naphtha raw material method. Coal to ethylene glycol is a unique production process in China, usually using coal as raw material to obtain CO and H2 through gasification, transformation, purification, and separation purification. Among them, CO produces oxalate esters through catalytic coupling and refining, and then undergoes hydrogenation reaction with H2 to obtain polyester grade ethylene glycol through refining. This process has a short process flow and low cost. Ethylene glycol and PTA are then polymerized to produce a series of polyester products such as filaments and staple fibers. Due to the presence of impurities such as 1,2-butanediol and ethylene carbonate in the ethylene glycol produced by the coal production process, the downstream acceptance level still needs to be improved. At present, polyester factories are generally used by blending coal to ethylene glycol and ethylene to ethylene glycol.
What is profit
Taking PTA as an example, PTA usually involves the concept of processing fees, which are not equivalent to processing costs or profits. Therefore, before clarifying PTA profits, it is necessary to first clarify PTA costs.
After clarifying the concept of PTA cost, PTA processing fee can be understood as the price difference between purchasing PX and processing it into PTA sales. Processing cost is not considered here, but only the "hard work cost" of dry processing. Therefore, it can be obtained that PTA processing fee=sales price - raw material cost, i.e. PTA processing fee=sales price - PX price × 0.655, and PTA profit=sales price - total cost, that is, PTA profit=sales price - raw material cost - processing cost=processing fee - processing cost. Therefore, when calculating product profits, direct data usually includes product sales prices, raw material prices, exchange rates, and other related factors such as industrial device maintenance and inventory. In addition, the quality of profits often determines the direction of trading strategies.
At the same level of industry prosperity, large refining enterprises are often able to earn more profits, mainly because they have eliminated outdated production capacity and minimized processing costs. Otherwise, when the entire industry is in a slump and processing costs are compressed, if the processing costs of outdated production capacity are higher than processing costs, the enterprise is already on the brink of loss. Even if low processing costs can force outdated production capacity to be phased out, advanced production capacity will still face losses if encountering ultra-low processing costs. PTA belongs to the category of "cost pricing" products, and the price patterns over the years have shown that due to the mature and concentrated production capacity of the PTA market, it is usually driven by cost first and then demand. When the cost logic is weak, prices will move downwards.
From upstream raw materials such as naphtha and PX in the polyester chain to midstream products such as PTA and ethylene glycol, and then to downstream filaments, staple fibers, polyester chips, polyester bottle chips, etc., the profit calculation of corresponding products basically follows the principle of profit=sales price - raw material cost - processing cost. The significant fluctuations in PTA processing costs are closely related to changes in production cycles. Production capacity investment, downstream profit sharing, and downstream processing fees increase; Downstream processing costs have increased, production may increase, and profits may once again be transferred downstream. Generally speaking, in a cycle of tight production capacity, inventory is low, profits expand, and high profits drive the acceleration of new production capacity. Next, the device enters the centralized production stage, which will lead to oversupply and profits heading towards losses.
[PX has relatively stable profits]
As of August 10th, the operating rate of PX was 82.99%, an increase of 1.15 percentage points compared to the previous month, with an increase of 1.5 million tons of units in Huizhou Refining and Chemical Phase II. The domestic PX production capacity base was adjusted to 43.73 million tons. Due to the strong demand for gasoline in North America during the summer, the logic of aromatics blending drives the prices of raw materials to strengthen. With this support, PX's valuation remains at a high level, and the price difference between naphtha and crude oil further narrows, leaving PXN in a relatively high position. Recently, international crude oil prices have risen, and with the boost of cost, the trend of gasoline meter demand has begun to peak. Downstream PTA processing fees are low, and PX is affected by downstream negative feedback. Coupled with an increase in its own operating rate, PXN has shown signs of a high decline.
Throughout the year, PX's profits were relatively stable, but not at a good level. As of August 14th, PX's profit was -26.5 US dollars per ton, which is at a lower level for the year. In the next 5 years, the PX industry plans to achieve a construction (expansion) capacity of 9.5 million tons per year. Among them, there are two enterprises with a scale of over 2 million tons/year, and the newly added production capacity is mainly distributed in East China, South China, and Northeast China, highlighting the trend of integrated development of upstream and downstream products. The new production capacity of PX will mainly be concentrated in 2023, and in the long run, it will still be a product with high import dependence.
[PTA Enterprise Profitability]
PTA, also known as purified terephthalic acid, is an important raw material used for manufacturing synthetic fibers such as polyester. China is one of the world's largest PTA producing countries and also one of the world's largest PTA consuming countries. Below is an analysis of the profit situation in China's PTA market.
The PTA market in China has a huge scale, with over 20 production enterprises. Recently, Hengli Petrochemical 2 # has put into production with 2.5 million tons, and the annual production capacity base has been increased to 79 million tons. At the same time, China's PTA consumption is also constantly increasing. It is expected that by 2025, China's PTA consumption will reach 43 million tons, and the market size will continue to expand.
PTA prices are influenced by various factors, such as raw material prices, supply and demand conditions, and capacity utilization. The price fluctuations in China's PTA market are significant, mainly caused by supply-demand imbalance and unstable global economic environment. However, overall, the PTA market prices in China are relatively stable, and market competition is fierce, with limited impact of price fluctuations on enterprises.
The profit level of PTA production enterprises is closely related to factors such as raw material prices, energy costs, capacity utilization, and competitive pressure. From the perspective of unit production, the gross profit of PTA production enterprises in China is between 550-650 yuan/ton, which is relatively low but also within the range that enterprises can bear.
From the PTA processing fees, it can be seen that there were even negative processing fees in March and early June 2022, indicating that upstream and downstream products are in severe fluctuations. This is mainly due to the rapid rise in international oil prices, which means that the cost side price is too high, while downstream demand is weak. Downstream chemicals have a weak follow-up, and the profits of intermediate products have been continuously squeezed, resulting in poor PTA profits and ultimately negative processing fees. Negative processing fees are converted based on PX cash on purchase. Due to the fact that raw material procurement expenses exceed product sales revenue, resulting in a running loss, there is actually a certain time difference between raw material procurement and product sales. When calculating profits, pay attention to the trend. As of the week ending August 11th, the average cost of PTA was 5673.44 yuan/ton, a decrease of 3.1% month on month. The processing fee remains low, with an average of 163.56 yuan/ton and a profit of -436.44 yuan/ton. Since August, PTA has started a downward trend, mainly due to the shift of main contracts to monthly positions, the significant reduction of main bulls' positions and profit taking. In addition, PX has weakened, and PTA has accumulated inventory expectations. PTA prices have moved downward under pressure, and processing fees have been compressed. Overall, the profit level of China's PTA market is within the range of severe losses, and coupled with PTA price fluctuations, enterprises need to closely monitor market changes and take timely response measures.
[Profit situation of polyester products]
From July to August 2022, the profit performance of polyester bottle chips and polyester chips was excellent, approaching 1700 yuan/ton and 500 yuan/ton respectively. The highest profit value of short fiber is close to 600 yuan/ton, and the overall price of short fiber fluctuates with the cost of polyester raw materials. DTY, a filament product, has a negative annual profit and poor performance. The profit trends of POY and FDY are similar, with extremely negative profits at the end of April and October 2022, followed by some recovery. By 2023, the expansion of terminal demand may provide support for polyester cash flow repair.
Starting from August 2023, with the weakening of PX, the polyester cost side quickly rose under the support of crude oil in the early stage, and then entered a downward trend again. However, under the influence of the peak travel season, the trend of gasoline and diesel was stronger, and the trend of naphtha was also stronger under the boost of demand. PXN has experienced significant compression since August after continuing its high level operation for two months.
Recently, polyester raw materials have rapidly retreated, and new polyester equipment has been put into operation. Product prices have followed the decline of raw materials, but the industry's poor processing has often expanded. The current polyester filament pre-spinning inventory is relatively low, coupled with the PTA futures spot correction, polyester profits have significantly improved, especially for chips and filaments. Polyester enterprises that reduce production due to upstream raw material cost pressure in the early stage have a higher probability of increasing load in the later stage. At the same time, the benefits of filament and staple fibers have also improved, mainly due to the upstream PTA and PX end concessions. The efficiency of bottle chips is poor, and coupled with the production of new production capacity, they have been on the brink of loss.
[Terminal Weaving Market Situation]
In 2022, the United States is facing enormous inflationary pressure. In the context of the global economic recession, consumer expectations have decreased, resulting in poor sales of clothing, textiles and other products and a large accumulation of inventory. Compared to 2022, there needs to be a certain degree of repair both domestically and internationally in 2023.
In terms of domestic demand, summer clothing production has basically ended, and major clothing wholesale markets have started to introduce new products in autumn and winter. Small batches of samples and production have been carried out, and orders and shipments have slightly rebounded. However, with the degradation of terminal consumption, some clothing enterprises are forced to reduce fabric costs. Although the price of grey fabric has slightly increased in some areas in the early stage, profits are still in a slight loss situation. Some weaving enterprises and Shaoxing circular machine enterprises in the Wujiang region have reported a slight increase in autumn and winter orders, but order profits are still at a low level.
Market Overview
The polyester industry chain is closely related to the national economy and people's livelihood, ranging from clothing and textiles, non-woven fabrics, filling materials, to yarns, sewing threads, etc.
PTA is a lower end product of petroleum, which undergoes a certain process to produce naphtha (also known as light gasoline). MX (mixed xylene) is extracted from the naphtha, and then PX (para xylene) is extracted. PTA uses PX (formula 65% -67%) as raw material, acetic acid as solvent, and air oxidation (oxygen 35% -33%) under the action of a catalyst to generate crude terephthalic acid. Then, the crude terephthalic acid is hydrotreated to remove impurities, and then crystallized, separated, and dried to obtain the refined terephthalic acid product, which is the PTA finished product.
The production process of ethylene glycol mainly includes ethylene method and oxalate ester method. Among them, the ethylene method can be divided into petroleum ethylene method, ethane ethylene method, and MTO ethylene method according to its different raw material processes. The naphtha ethylene method is currently the mainstream production method used in China, with about 67% of the world's ethylene glycol produced using the naphtha raw material method. Coal to ethylene glycol is a unique production process in China, usually using coal as raw material to obtain CO and H2 through gasification, transformation, purification, and separation purification. Among them, CO produces oxalate esters through catalytic coupling and refining, and then undergoes hydrogenation reaction with H2 to obtain polyester grade ethylene glycol through refining. This process has a short process flow and low cost. Ethylene glycol and PTA are then polymerized to produce a series of polyester products such as filaments and staple fibers. Due to the presence of impurities such as 1,2-butanediol and ethylene carbonate in the ethylene glycol produced by the coal production process, the downstream acceptance level still needs to be improved. At present, polyester factories are generally used by blending coal to ethylene glycol and ethylene to ethylene glycol.
What is profit
Taking PTA as an example, PTA usually involves the concept of processing fees, which are not equivalent to processing costs or profits. Therefore, before clarifying PTA profits, it is necessary to first clarify PTA costs.
After clarifying the concept of PTA cost, PTA processing fee can be understood as the price difference between purchasing PX and processing it into PTA sales. Processing cost is not considered here, but only the "hard work cost" of dry processing. Therefore, it can be obtained that PTA processing fee=sales price - raw material cost, i.e. PTA processing fee=sales price - PX price × 0.655, and PTA profit=sales price - total cost, that is, PTA profit=sales price - raw material cost - processing cost=processing fee - processing cost. Therefore, when calculating product profits, direct data usually includes product sales prices, raw material prices, exchange rates, and other related factors such as industrial device maintenance and inventory. In addition, the quality of profits often determines the direction of trading strategies.
At the same level of industry prosperity, large refining enterprises are often able to earn more profits, mainly because they have eliminated outdated production capacity and minimized processing costs. Otherwise, when the entire industry is in a slump and processing costs are compressed, if the processing costs of outdated production capacity are higher than processing costs, the enterprise is already on the brink of loss. Even if low processing costs can force outdated production capacity to be phased out, advanced production capacity will still face losses if encountering ultra-low processing costs. PTA belongs to the category of "cost pricing" products, and the price patterns over the years have shown that due to the mature and concentrated production capacity of the PTA market, it is usually driven by cost first and then demand. When the cost logic is weak, prices will move downwards.
From upstream raw materials such as naphtha and PX in the polyester chain to midstream products such as PTA and ethylene glycol, and then to downstream filaments, staple fibers, polyester chips, polyester bottle chips, etc., the profit calculation of corresponding products basically follows the principle of profit=sales price - raw material cost - processing cost. The significant fluctuations in PTA processing costs are closely related to changes in production cycles. Production capacity investment, downstream profit sharing, and downstream processing fees increase; Downstream processing costs have increased, production may increase, and profits may once again be transferred downstream. Generally speaking, in a cycle of tight production capacity, inventory is low, profits expand, and high profits drive the acceleration of new production capacity. Next, the device enters the centralized production stage, which will lead to oversupply and profits heading towards losses.
[PX has relatively stable profits]
As of August 10th, the operating rate of PX was 82.99%, an increase of 1.15 percentage points compared to the previous month, with an increase of 1.5 million tons of units in Huizhou Refining and Chemical Phase II. The domestic PX production capacity base was adjusted to 43.73 million tons. Due to the strong demand for gasoline in North America during the summer, the logic of aromatics blending drives the prices of raw materials to strengthen. With this support, PX's valuation remains at a high level, and the price difference between naphtha and crude oil further narrows, leaving PXN in a relatively high position. Recently, international crude oil prices have risen, and with the boost of cost, the trend of gasoline meter demand has begun to peak. Downstream PTA processing fees are low, and PX is affected by downstream negative feedback. Coupled with an increase in its own operating rate, PXN has shown signs of a high decline.
Throughout the year, PX's profits were relatively stable, but not at a good level. As of August 14th, PX's profit was -26.5 US dollars per ton, which is at a lower level for the year. In the next 5 years, the PX industry plans to achieve a construction (expansion) capacity of 9.5 million tons per year. Among them, there are two enterprises with a scale of over 2 million tons/year, and the newly added production capacity is mainly distributed in East China, South China, and Northeast China, highlighting the trend of integrated development of upstream and downstream products. The new production capacity of PX will mainly be concentrated in 2023, and in the long run, it will still be a product with high import dependence.
[PTA Enterprise Profitability]
PTA, also known as purified terephthalic acid, is an important raw material used for manufacturing synthetic fibers such as polyester. China is one of the world's largest PTA producing countries and also one of the world's largest PTA consuming countries. Below is an analysis of the profit situation in China's PTA market.
The PTA market in China has a huge scale, with over 20 production enterprises. Recently, Hengli Petrochemical 2 # has put into production with 2.5 million tons, and the annual production capacity base has been increased to 79 million tons. At the same time, China's PTA consumption is also constantly increasing. It is expected that by 2025, China's PTA consumption will reach 43 million tons, and the market size will continue to expand.
PTA prices are influenced by various factors, such as raw material prices, supply and demand conditions, and capacity utilization. The price fluctuations in China's PTA market are significant, mainly caused by supply-demand imbalance and unstable global economic environment. However, overall, the PTA market prices in China are relatively stable, and market competition is fierce, with limited impact of price fluctuations on enterprises.
The profit level of PTA production enterprises is closely related to factors such as raw material prices, energy costs, capacity utilization, and competitive pressure. From the perspective of unit production, the gross profit of PTA production enterprises in China is between 550-650 yuan/ton, which is relatively low but also within the range that enterprises can bear.
From the PTA processing fees, it can be seen that there were even negative processing fees in March and early June 2022, indicating that upstream and downstream products are in severe fluctuations. This is mainly due to the rapid rise in international oil prices, which means that the cost side price is too high, while downstream demand is weak. Downstream chemicals have a weak follow-up, and the profits of intermediate products have been continuously squeezed, resulting in poor PTA profits and ultimately negative processing fees. Negative processing fees are converted based on PX cash on purchase. Due to the fact that raw material procurement expenses exceed product sales revenue, resulting in a running loss, there is actually a certain time difference between raw material procurement and product sales. When calculating profits, pay attention to the trend. As of the week ending August 11th, the average cost of PTA was 5673.44 yuan/ton, a decrease of 3.1% month on month. The processing fee remains low, with an average of 163.56 yuan/ton and a profit of -436.44 yuan/ton. Since August, PTA has started a downward trend, mainly due to the shift of main contracts to monthly positions, the significant reduction of main bulls' positions and profit taking. In addition, PX has weakened, and PTA has accumulated inventory expectations. PTA prices have moved downward under pressure, and processing fees have been compressed. Overall, the profit level of China's PTA market is within the range of severe losses, and coupled with PTA price fluctuations, enterprises need to closely monitor market changes and take timely response measures.
[Profit situation of polyester products]
From July to August 2022, the profit performance of polyester bottle chips and polyester chips was excellent, approaching 1700 yuan/ton and 500 yuan/ton respectively. The highest profit value of short fiber is close to 600 yuan/ton, and the overall price of short fiber fluctuates with the cost of polyester raw materials. DTY, a filament product, has a negative annual profit and poor performance. The profit trends of POY and FDY are similar, with extremely negative profits at the end of April and October 2022, followed by some recovery. By 2023, the expansion of terminal demand may provide support for polyester cash flow repair.
Starting from August 2023, with the weakening of PX, the polyester cost side quickly rose under the support of crude oil in the early stage, and then entered a downward trend again. However, under the influence of the peak travel season, the trend of gasoline and diesel was stronger, and the trend of naphtha was also stronger under the boost of demand. PXN has experienced significant compression since August after continuing its high level operation for two months.
Recently, polyester raw materials have rapidly retreated, and new polyester equipment has been put into operation. Product prices have followed the decline of raw materials, but the industry's poor processing has often expanded. The current polyester filament pre-spinning inventory is relatively low, coupled with the PTA futures spot correction, polyester profits have significantly improved, especially for chips and filaments. Polyester enterprises that reduce production due to upstream raw material cost pressure in the early stage have a higher probability of increasing load in the later stage. At the same time, the benefits of filament and staple fibers have also improved, mainly due to the upstream PTA and PX end concessions. The efficiency of bottle chips is poor, and coupled with the production of new production capacity, they have been on the brink of loss.
[Terminal Weaving Market Situation]
In 2022, the United States is facing enormous inflationary pressure. In the context of the global economic recession, consumer expectations have decreased, resulting in poor sales of clothing, textiles and other products and a large accumulation of inventory. Compared to 2022, there needs to be a certain degree of repair both domestically and internationally in 2023.
In terms of domestic demand, summer clothing production has basically ended, and major clothing wholesale markets have started to introduce new products in autumn and winter. Small batches of samples and production have been carried out, and orders and shipments have slightly rebounded. However, with the degradation of terminal consumption, some clothing enterprises are forced to reduce fabric costs. Although the price of grey fabric has slightly increased in some areas in the early stage, profits are still in a slight loss situation. Some weaving enterprises and Shaoxing circular machine enterprises in the Wujiang region have reported a slight increase in autumn and winter orders, but order profits are still at a low level.
In terms of external demand, clothing exports from Europe and America have performed poorly this year, but the export situation of countries such as the Middle East and Russia is still good. Some domestic clothing companies can only focus more on expanding into markets in other countries outside of Europe and America. Although there are orders in these markets, prices and profits are often relatively low. In the short term, overseas clothing brands will place autumn and winter orders one after another. In the long run, the pressure on clothing exports will continue, especially the low profit situation.
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