Chemicals 2015 Review and 2016 Outlook
Behind the "tragic" is profit erosion
In 2015, for commodities, the word "miserable" is amazing. Black and non-ferrous materials are in constant distress, and the market has dropped to the "price of cabbage". Chemicals are not immune to the downturn in commodities. In addition to PTA, which is still "hard to carry", both polyolefin "brothers" and methanol have experienced "torture" that is almost "halved".
According to statistics from Futures Daily reporters, among the chemicals, the price of PTA fell by 24% from the high point of the year, and the other three varieties all fell by more than 30%. Taking the two varieties with larger declines as an example, the high point of polypropylene during the year was 9027 yuan/ton, and the low point was 5361 yuan/ton, with a cumulative decline of 41%, and methanol fell from the year high of 2654 yuan/ton to 1590 yuan. / ton, the cumulative decline was 40.1%.
Looking back on the trend in 2015, Gao Jianming, an analyst at Hairong Investment, believes that chemical products basically reached the high point of the year at the end of April and entered a downward channel in early May. Among them, the most spectacular are the "olefin" brothers and methanol, their "tragic" is reflected in the changes in the market.
PP, as the twin brother of LLDPE, under the suppression of loose supply, the "squeezing profit market" in the fourth quarter of 2015 was vividly interpreted. "In addition to the reasons for its own oversupply, there are also propylene monomers plummeting to 3800 yuan / ton, leading to the collapse of the cost end, and the large price difference between pellets and powder, the profit of powder is good, the room for price reduction is large, and the price of PP pellets cannot stand firm. , the downstream demand has little power to pull up." Gao Jianming said.
Compared with polyolefins, methanol prices have fallen significantly behind. It can be said that the rise of methanol-to-olefins process closely links methanol and olefins. "Most of the units are outsourced methanol, which increases the demand for methanol on the one hand and the supply of olefins on the other. Methanol and olefins have obvious joint effects, but whether it is the slump at the end of 2014 or the beginning of July 2015. The decline in methanol prices lags behind olefins.” said Cai Yali, an analyst at Zhongyuan Futures.
Speaking of the general decline of chemical products in 2015, industry insiders believe that such a trend is actually reasonable. "Coal has fallen by more than 60% since 2012, and the price of crude oil has fallen by more than 60% since the second half of 2014." Cai Yali believes that the decline in the price of coal and crude oil as the source directly compresses the downstream chemical industry The cost of products, downstream products follow the decline of course. However, in the process of falling prices, the specific performance of each chemical is different.
After three consecutive years of decline in PTA from 2011 to 2014, the profit of the production link has been squeezed. The decline in olefins is due to the huge profit margins left after the crude oil market slumped in the second half of 2014.
It is understood that in the first half of 2015, the average profit of olefins in the naphtha route was 2,500 yuan/ton. The price drop in the second half of 2015 was just a performance of olefins removing high profits during the period of capacity expansion. At present, the average profit of olefin production is 1,500 yuan/ton.
"The structure of the olefin price difference is near high and far low, and it is in a state of high discount in the far month, indicating that when the production capacity is expanded, the funds are still shorting olefin profits." Cai Yali said.
In December 2015, the 600,000-ton MTO plant of Shenhua Yulin was put into operation. In 2016, China Coal Mengda 600,000 tons, Jiangsu Shenghong 1.2 million tons, Changzhou Fude 330,000 tons, Betel 300,000 tons, Salt Lake Group 1 million tons, Zhongtian Hechuang's 1.37 million tons and Jiutai Energy's 600,000 tons of olefin production capacity will also be launched. "Capacity expansion is generally accompanied by profit contraction. In the middle and late stages of capacity expansion, prices will fall back to around costs. In this way, there is still room for olefin prices to fall in the far month." An industry insider believes.
"In the context of weak demand, high-profit industries have more short-selling opportunities. For example, in the PP industry, the current profit of oil-based PP production is 500 yuan / ton, which has been compressed by more than 1,000 yuan / ton, but there is still a squeeze in the later stage. Room." Gao Jianming said.
What is the culprit in disturbing the chess game?
"This round of chemical price decline is not unexpected, but the rate of decline exceeded market expectations. In 2015, chemical products are not easy to play, and it is a bit tricky to operate." An industry veteran who focuses on chemical products told a reporter from Futures Daily. Frankly speaking, the culprit behind the “weird” market in the second half of 2015 lies in market expectations.
The global financial turmoil caused by the Chinese stock market crash has triggered market concerns about the economic crisis, which has triggered a large-scale destocking of all links in the real industry. In such a state, commodity falls are inevitable.
As the market discussed, the rapid decline in chemical prices stemmed from "short profits". It is understood that the slump in international oil prices has greatly increased the profits of chemical products, especially polyolefin products.
"In an environment where commodities are almost wiped out, polyolefin products can be described as huge profits, which makes commodity investors incomprehensible and intolerable." The above-mentioned industry insiders said that as long as a certain commodity is profitable, there will be no funds. Do not hesitate to go short, polyolefins and related varieties are to a certain extent "victims" of this kind of thinking.
In fact, for chemicals, there are many factors that affect the price, the most important of which are supply and demand and cost. According to Pan Zeng'en, an analyst at Industrial Futures, the price of chemical products is determined by supply and demand, not cost, but sometimes cost can react against supply and demand. For example, in 2015, PTA entered a stage of oversupply, prices continued to fall, and profits in the upper, middle and lower reaches of the industrial chain contracted sharply, and even suffered losses. In this case, the industry itself enters a production capacity elimination cycle, and some old production capacities are shut down, which in turn affects the equilibrium price.
In terms of cost, U.S. crude oil fell from $62.58/barrel to $34.53/barrel in 2015, a drop of 44.8%. The impact of cost collapse on chemicals can be imagined. But in fact, the current chemical raw materials show a trend of decentralization.
"The large-scale commissioning of coal-to-olefins units makes crude oil no longer the only cost factor to consider, and the operation of PDH units also has an additional impact on polypropylene; natural gas and coal prices determine the cost of methanol, and the impact of oil prices Relatively weak; oil price is still a key factor in determining the cost of PTA." Pan Zeng'en said.
In 2015, there was a saying in the market, that is, "chemical products trading, if you are not careful, you will lose everything". This is not an exaggeration. Just in 2015, both Xiaosan and industrial customers experienced an "unprecedented" shuffle.
Industry insiders believe that the "miserable wash" is related to the market's improper judgment of supply and demand. In particular, demand, once misread, the consequences are unimaginable.
"In terms of supply and demand indicators, we need to pay attention to the progress of new production capacity, the start of original production capacity, and the seasonal factors of demand." Pan Zeng'en said.
The reporter learned that some time ago, chemical products were basically destocked. The slump in futures at the end of June 2015 caused the cash flow of the PTA factory to deteriorate. In response to the crisis, the PTA factory headed by Yisheng formulated a shutdown and maintenance plan, which was implemented in late July. The PTA market experienced 4 months of destocking. Recently, due to the recovery of supply and the weakening of demand, a scissors gap between supply and demand has been formed, and the price of PTA has weakened again.
In terms of polyolefin, after the National Day in 2015, it was in the destocking stage, but the price did not strengthen. The main reason is that the profit of powder material is good, and the price reduction space is large, which in turn drags down the pellet material. "Due to the substitution of powder materials and the weak downstream demand, PP fell more than LLDPE after October 2015, and the price difference between the two expanded from 1,000 yuan / ton to 2,000 yuan / ton." Cai Yali said.
As for the drop in methanol prices, the main reason is that the demand growth is less than expected. "There are many methanol-to-olefins plants planned to be put into operation in 2015, but due to various reasons, many plants have been shut down or delayed in production, and the growth expectations of new demand have been constantly failing. At the same time, the traditional downstream demand is not good, and the real estate industry is becoming more and more difficult. In the boom, the demand for formaldehyde has gradually shrunk, and dimethyl ether has also collapsed due to the collapse in oil prices." Gao Jianming believes that the above factors and the supply of methanol have not declined, and its price is not unreasonable.
Interlocking each other and walking well "playing chess"
In 2015, every step of the chemical operation was ruined. In the new chess game in 2016, careful layout is particularly important.
Industry insiders generally believe that in 2016, it is necessary to focus on the changes in the supply and demand pattern of chemical products and the change in the profit pattern of the industrial chain.
In the polyolefin market, in 2016, it is expected that 2 million tons of new PE plants will be put into operation, and 2.8 million tons of new PP plants will be put into operation, and the supply of polyolefins will be in excess.
"Under the background of strong supply and weak demand, the de-profit of the polyolefin industry chain will continue. According to the current crude oil and coal prices, the profit of PE production is still huge, and the price of PE will oscillate down in the later period. For PP, its overall The trend is similar to PE, but at the current price, the PDH unit has suffered serious losses, and the profits of coal head and oil head have also been squeezed. If the unit stops production, the price may rebound temporarily.
Similarly, in Cai Yali's view, in the process of capacity expansion, olefin profits will continue to be squeezed, and the price focus will further shift down. "The supply of propylene is already in excess, and the domestic MTP and PDH plants specializing in propylene are both in a state of loss. Many small MTP plants in Shandong, such as those in Shouguang Luqing, Ruichang Chemical, and Lu Shenfa, have been shut down for a long time. Among the PDH plants, 10,000 Hua, Weiwei, and Sanyuan also had short-term shutdowns. In 2016, the operation of specialized propylene production plants weakened the pressure on propylene prices. The expansion of foreign polyolefin production is mainly polyethylene. In 2016, nearly 2 million tons of production capacity in North America was put into production. "Cai Yali believes that the downward movement of polyolefin prices in the future is mainly due to the decline of polyethylene, and the price difference between PE and PP will narrow. It is expected that the price range of LLDPE in 2016 will be 6000-8500 yuan / ton, and the price range of PP will be 5000-7000 yuan / ton. /Ton.
In the PTA market, due to the fact that the industrial chain has been completely de-profited, and the industry has entered a state of passive de-capacity in 2015, about 20% of the current production capacity has been closed for a long time (excluding the 4.5 million tons of plants currently suspended by Xianglu Petrochemical). The chain is basically in a state of balance between supply and demand. Under this pattern, the price trend of PTA in 2016 will be dominated by profits. Specifically, the price difference between PX and naphtha and the dynamic processing fee of PTA will become important indicators of the market trend. Industry insiders generally predict that in 2016, PTA will oscillate within the range of 4,000-5,500 yuan/ton.
As for the methanol market, at present, the profit of the manufacturer is meager, but it is not at a loss. The current low price will not stimulate the restart of closed natural gas plants. The methanol-to-olefin plants in Northwest China are in a profitable state, while those in East China are on the verge of loss. The overall market supply and demand is in a weak balance.
"However, due to the suppression of olefins, it is difficult for the methanol market to perform well in 2016, and the price range is expected to be 1,500-2,000 yuan/ton," an industry insider said.
It is worth mentioning that, in addition to supply and demand, in 2016, crude oil was still the vane of the chemical market.
"The slow recovery of the global economy in 2016 will bring an increase in demand of 1 million barrels per day. The growth in demand is slowly consuming the excess supply, but the oversupply pattern is hard to change." Wang Guangqian, an analyst at Soochow Futures, said that in the In the context of the Fed raising interest rates, international oil prices will hover at a low level before mid-2016, and then bottom out and rebound in the peak demand season and boosted by high-cost crude oil producers’ production cuts or OPEC’s production cuts. It is expected that WTI crude oil will fluctuate in a range of 30-55. USD/barrel, Brent crude oil fluctuates in the range of 35-60 USD/barrel.
In addition, industry insiders reminded that some risk factors need to be focused on when "playing chess" well. Among them, the most important is the directional changes of national macro policies, which will affect prices through expectations on the demand side. Dollar movements are also a focus. In 2016, the rhythm of the Fed’s rate hike determines the trend of the U.S. dollar. On the whole, the U.S. dollar is in an appreciation cycle, which has a negative impact on crude oil. In addition, it is also necessary to pay attention to the influence of the original equipment maintenance plan and the deviation between the actual production progress and the expected progress of the new equipment on the supply side.