There is still a lot of room for growth in the late stage of PTA

Tight supply and demand balance

introduction

At the end of June, under the background of delays in device maintenance restart and strong terminal demand, PTA supply tensions warmed up, and PTA futures pulled up strongly. On July 11, the main 1709 contract was closed at the daily limit, and the highest on July 17 was 5490. Yuan / ton. After that, due to the lack of cost-based growth, coupled with the market's fear of high psychological and profit-taking pressure, PTA futures prices continued to fall. How will the PTA futures price in the market be interpreted?

The economic situation shows signs of improvement

From March to April, under the background of a new round of real estate regulation and de-leverage in the financial sector, the market is more pessimistic about China's economic growth prospects. On May 24, Moody's downgraded China's credit rating. Subsequently, the central bank conducted a large number of MLF operations in early June. In June, the money and credit data exceeded expectations, and China's economic data showed a staged improvement. Among them, in June China's Caixin manufacturing PMI index returned to the 50.4 glory line, higher than the expected 49.8 and the previous value of 49.6; China's official manufacturing index also rose from 51.2 in May to 51.7, the second highest in the year point. Electricity generation and import and export data also exceeded expectations. In the second quarter, GDP increased by 6.9% year-on-year, exceeding market expectations.

From a monetary perspective, due to the tightening of financial supervision in the first half of the year and the tightening of monetary policy brought about by the tightening of real estate regulation and control policies, the market has seen a decline in stocks and bonds, and then the central bank has carried out a large number of MLF operations, alleviating market funds. Tensions are expected, and the seasonal window of seasonal money shortages will smoothly transition in June, and the interest rate of funds will fall sharply. The six-month bill direct interest rate in the Yangtze River Delta, which reflects the interest rate of the entity's funds, fell from a high of 4.4% at the end of May to a level of 4%. In mid-July, the China Financial Work Conference was held. The central bank emphasized the implementation of a more stable monetary policy and removed the “neutral” terminology in the first half of the year. On July 24, the central bank’s open market net investment was 220 billion yuan. A five-week high to ease the volatility of interest rates after July, which means that the monetary policy will be slowed down in the later period, escorting the steady operation of the real economy.

Overall, in July, China’s economic situation and monetary policy showed marginal improvement compared with the first half of the year.

The picture shows the 6-month bill direct interest rate in the Yangtze River Delta region (%)

Seasonal improvement in demand for crude oil

At the end of last year, OPEC reached the first frozen production agreement in eight years. The agreement stipulated that OPEC oil producers freeze production at 32.5 million barrels per day. On May 25, the OPEC oil producers extended the frozen production agreement for another nine months to March 2018. From May to June 2017, the OPEC national production reduction agreement represented by Saudi Arabia was implemented well, but the output of Nigeria and Libya production exempted countries increased by 550,000 barrels per day. The total output of OPEC increased by 637,000 barrels per day to 32.61 million barrels per month. The day exceeded the level specified in the frozen production agreement. However, the OPEC Oil Producing Countries Conference, held in St. Petersburg, Russia on July 24, will review the market situation and consider any proposals related to the production reduction agreement. Among them, the recent increase in production in Libya and Nigeria will be highlighted. The oil-producing Congress is expected to impose soft constraints on crude oil production in Libya and Nigeria, and OPEC crude oil production continues to increase in the second half of the year.

In the non-OPEC oil-producing countries, Russia has been a strong advocate of the frozen production reduction agreement, and Russia has assumed half of the non-OPEC 558,000 barrels/day production reduction task. However, from the situation in the past few months, there is still a certain gap between the Russian crude oil production and the level specified in the frozen production reduction agreement. Russian crude oil production and export volume are expected to be further actively controlled in the second half of the year.

At present, the focus of the market is on the increase in US crude oil production. According to historical data comparison, the number of inflection points of the active oil rigs lags behind the oil price inflection point for 4 months. As the current oil price breaks down in March, the number of active oil rigs may fall in the continuous upward cycle in July. . For US crude oil production, the increase or decrease of oil rigs leads the US crude oil production to increase or decrease by 5-6 months, which means that the increase in US crude oil production will last at least until November. However, if the output of a single well in a shale oil well in the United States is depleted, the output may fall to the top in advance.

From the actual situation, as of the week of July 21, the US active oil drilling fell by one to 764, and the US crude oil output increased by 32,000 barrels per day to 9.429 million barrels per day. Throughout June, US crude oil production fell for the first time since October last year. The production growth accelerated in July, but the growth of active oil rig data showed signs of slowing down. This means that the increase in US crude oil production in the second half of the year may be lower than expected.

On the demand side, the operating rate of US refineries in the week of July 14 fell by 0.5 percentage points to 94% on a week-on-week basis, still higher than last year and the five-year average. From a global perspective, May-June is the seasonal off-season of global crude oil demand. As the refinery overhauls and the developed economies in Europe and America enter the seasonal demand season, international crude oil demand will rebound by 2 million barrels per month from July to August. On the day of the production of frozen oil in major oil producing countries, global crude oil inventories will be further digested, and international oil prices are expected to oscillate.

PX production profit follows the rebound of oil prices

The table shows the Asian PX equipment maintenance plan for the second half of 2017 (10,000 tons)

From January to June, China's PX production was 4.756 million tons, up 6.94% year-on-year; PX cumulative imports were 6.66 million tons, up 10% year-on-year; PX total supply increased by 8.74% year-on-year. Among them, the total supply of PX in the second quarter increased by 4.2% year-on-year, and the supply growth rate of 13% in the first quarter has fallen sharply. Since the beginning of the year, PX production cash flow has been oscillating downwards. The main reason is that the South African Sade incident has led to a strong willingness to increase the domestic PX self-sufficiency rate. The petrochemical plants have increased the production load of PX. The 950,000 tons PX unit in Huizhou, China has even cancelled two. During the quarterly maintenance plan, PX supply showed a more-than-expected growth. At the same time, the PTA factory severely increased the maintenance due to the loss, which made the PX demand a negative. This is the main reason why prices remain weak in the context of the PX overhaul in April-June.

As of July 21, PX prices closed at $808/tonne CFR China, and the corresponding PX profit for naphtha production was $79/ton, which was at the lower-middle level. We believe that due to the strong demand for terminal polyester this year, the current PTA production and processing costs have increased significantly. With the restart of the PTA unit, the demand for PX will be significantly improved. In the context of PX maintenance and demand increase, PX inventory The consumption ratio will slowly decline, and PX prices and profits are expected to be stronger than oil prices.

The picture shows PX production supply and demand and social inventory trends (10,000 tons)

PTA supply will continue to be tight

Around the Spring Festival this year, PTA social stocks accumulated nearly 500,000 tons seasonally. The superimposed market worried about the sharp increase in the number of Yisheng credit warehouses. Since mid-February, the current price of PTA fell, and PTA's own production profits were compressed. Subsequently, the PTA factory carried out large-scale parking maintenance. After the parking and overhaul of the Hengli petrochemical plant in June, the restart time was postponed until the beginning of August, and the contracted goods in August were reduced by 20%. The multiple sets of equipment of the Sinopec system also appeared overhauled. Restart delay condition. The unexpected contraction of the PTA supply side has increased market concerns about post-supply tensions.

From the perspective of destocking, this year is also significantly better than last year. In March last year, PTA began to destock. By October, social inventories fell to around 1.3 million tons. After the PTA seasonal accumulation before and after the Spring Festival this year, the inventory began to destock again at the end of March. As of mid-July, social inventories have fallen to 1.1 million. Below the tonnage level, it is significantly lower than last October's level and hit a new low since 2014. This shows that the PTA supply and demand side has been significantly improved, and the supply is delayed after high profit, which means that the supply flexibility of the PTA market is small.

One of the major factors in suppressing the PTA futures price this year is Yisheng’s credit warehouse receipts. However, since April, Yisheng’s credit warehouse receipts have started to fall. As of July 21, the number of credit warehouse receipts has reached 100,000 from the end of March. Zhang fell sharply to 66,617, and the current credit warehouse receipts are still in the downtrend channel. The pressure on the futures of the PTA credit warehouse receipts will be smaller and smaller. On the other hand, Hengyi Petrochemical 000703, the stock bar (16.24 -4.02%, diagnostic stock) as the parent company of Yisheng Petrochemical, the recent stock price rose sharply, and last week implemented the second employee stock ownership plan, the lock-up period is one In the year, Hengyi Petrochemical, which is mainly engaged in PTA, implemented the employee stock ownership plan at the current stock price position, indicating that it has great confidence in the profitability of PTA production in the later period. This is in stark contrast to the background of the PTA futures oscillating in the fourth quarter of last year.

Further analysis, as of July 21, the total number of PTA warehouse receipts was 141,300. After deducting Yisheng's more than 66,000 credit warehouse receipts, the PTA delivery warehouse had only 75,000 physical warehouse receipts, and the physical warehouse receipts. Most concentrated in the port area of ​​Jiangsu, the concentration of supply is high. In the later period, there are still nearly 12 million tons of PTA devices in the PTA market that have not been inspected and operated. Among them, Jialong Petrochemical's 600,000-ton PTA plant was shut down for 15 days on July 13 and Yizheng Petrochemical's 600,000-ton plant plan was on August 6. Parking overhaul for 15-20 days, Zhuhai BP and Honggang Petrochemical's cumulative 2.6 million tons of equipment plan to stop maintenance in August, PTA supply will continue to be tight, which reserved a larger imagination for the further interpretation of the PTA market.

The polyester industry enters the boom cycle ahead of schedule

The picture shows the inventory and revenue of textile and apparel listed companies (100 million yuan, %)

From January to June, China's polyester production was 19.26 million tons, an increase of nearly 10% year-on-year. The finished goods inventory of the polyester segment also fell from a high of around 25 days in March to a 9-day level in mid-July, and the stock levels of some varieties such as polyester staple fiber and FDY were only about 5 days. In fact, since the second half of 2016, polyester companies have held 4+N meetings for many times. The industry has strengthened self-discipline and the market has entered the oligopoly pricing stage. The prices of finished products have also risen against the downward trend of raw materials. Up to now, the average production profit of the polyester industry has remained at around 130 yuan/ton, and the operating rate of polyester plants has remained at the highest level in the same period of 86%. This shows that the current polyester market is very optimistic, and the polyester industry has entered the boom cycle ahead of schedule. in.

In 2016, the terminal textile and garment industry ushered in the industry replenishment cycle. As of the first quarter of 2017, the proportion of raw materials, intermediate processing links and finished goods inventories of apparel listed companies has fallen to 120%, a record low since 2012. . As of the end of 2016, the proportion of stocks in all links of fabric-listed companies to the main revenue also hit a new low since 2015. In the first quarter of 2017, fabric inventory accounted for a 50% increase in the proportion of main business income, indicating that fabric processing companies began a large number of restocking operations in the first quarter of this year. It is understood that half of the grey cloth inventory is used as the raw material by the terminal clothing enterprises, and nearly half of them are hoarded by the cloth traders, which proves that the replenishment cycle of the downstream textile and clothing links is coming. July-August is the seasonal off-season of the polyester industry. However, due to the impact of the rebound in exports and the replenishment of the domestic apparel industry, it is expected that there will be limited room for seasonal decline in polyester demand. The demand for polyester market will remain strong throughout the second half of the year. pattern.

Overall, with the extension of the OPEC frozen production agreement and the seasonal improvement in demand, the supply and demand improvement, the price of crude oil fell. PX equipment maintenance is still strong and demand is slowly increasing, and PX prices are expected to follow the oil price steadily. Under the background of equipment overhaul and terminal demand exceeding expectations, the PTA market maintains a tight balance pattern of destocking, and there is still a new round of PTA factory overhaul in August. In addition, the Yisheng credit warehouse receipts have peaked, and it is expected that the later PTA futures will still be better. Big upside.

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(Editor: Xie Hanyao HF044)