Caprolactam Semi Annual Report In 2020: Value Return After Oversold In The First Half Of The Year

      2020 At the beginning of the year, an unprecedented epidemic swept across the world, which had a significant impact on the global political, economic and social patterns. The world was caught in the dilemma of superposition of epidemic outbreak, economic recession and sharp drop of oil price, and spent the first half of the year in a thrilling manner. In the second half of the year, domestic consumption will gradually recover, the epidemic situation abroad will remain severe, and domestic demand will be expected. However, foreign trade expectations will return to rationality, and the commodity market will be in crisis. In the second half of the year, demand recovery will be accompanied by short-term disturbance.

The first part is the summary of caprolactam market operation in the first half of the year

one In the first quarter, it fell to a record low, and the value returned in the second quarter

Figure 1 price comparison of caprolactam and pure benzene in 2020

Source: Longzhong information

Figure 2 price comparison of caprolactam and PA6 in 2020

Source: Longzhong information

Table 1 price comparison of pure benzene, caprolactam and PA6 chips in 2020

Unit: yuan / ton

Source: Longzhong information

    2020 In the first quarter of 2008, it was mainly affected by the spread of global public health events and the epic drop of oil price caused by crude oil price war. After the Spring Festival, the domestic bulk commodity market fell sharply. From February to March, the price of chemical products basically dropped to 2450 yuan / T, 7600-7700 yuan / T of East China caprolactam liquid spot, 9000-9200 yuan / ton of conventional spinning chips in East China, and China's crude oil price war was the main reason for this East high speed spinning chips 9600-9700 yuan / ton. At the beginning of April, on the one hand, the domestic epidemic situation was gradually controlled and domestic demand was restored; on the other hand, OPEC + coordinated production reduction supported the oil market; in addition, the speculative buying on the capital side attracted by low prices supported the demand; the caprolactam and PA6 markets were shaken and repaired under the support of various parties. The prices of caprolactam and PA6 rebounded from April to June. By the end of June, the spot price of caprolactam in East China rose to 10100-10300 yuan / ton, 11100-11600 yuan / ton for East China conventional spinning chips, and 11800-12000 yuan / ton for high-speed spinning chips.

According to Longzhong statistics, in the first half of 2020, the average spot price of caprolactam liquid was 9872 yuan / ton, a year-on-year decrease of 25.09%; the average price of conventional spinning chips of PA6 was 10939 yuan / ton, a year-on-year decrease of 23.28%; the average price of high-speed spinning chips of PA6 was 11523 yuan / ton, a year-on-year decrease of 23.55%.

two Caprolactam production decreased slightly compared with the same period of last year, while import increased

Figure 3 Comparison of domestic caprolactam production from 2019 to 2020

Source: Longzhong information

2-4 Due to the impact of domestic epidemic situation and demand, the production of caprolactam decreased significantly compared with the same period last year. After May, demand recovered and caprolactam production increased significantly. According to information, the domestic production of caprolactam decreased by 1.071 million tons in the first half of 2020.

Figure 4 Comparison of caprolactam imports from 2019 to 2020

Source: Longzhong information

two thousand and twenty From January to may, the import volume of caprolactam in China was 92600 tons, an increase of 10200 tons over the same period of last year, with a growth rate of 12.35%.

3.PA6 The output decreased slightly year on year

Fig. 5 Comparison of domestic PA6 chip production from 2019 to 2020

Source: Longzhong information

2-3 Affected by the impact in January, the resumption of downstream work in China was delayed, the domestic traffic and personnel flow control was strict, and the demand basically stagnated, and the start-up of polymerization plants from February to March decreased significantly. From April to June, the demand gradually recovered, and the output of PA6 increased simultaneously. Especially, the sharp increase in demand for masks and ear bands in April promoted the de stocking of spinning process and the enthusiasm of spinning production from May to June. Meanwhile, with the gradual reopening of foreign economy, the supply side was optimistic about the demand, and the manufacturers' profit was improved, and the production enthusiasm was high. According to Longzhong information statistics, in the first half of 2020, the total domestic PA6 output was 1.5975 million tons, a year-on-year decrease of 23700 tons or 1.46%.

four Prices rose steadily in the second quarter, and caprolactam profits improved

  Table 2 Comparison of monthly benzene price difference in 2020

Unit: yuan / ton

Source: Longzhong information

two thousand and twenty In the first four months of the year, the price difference of benzhexyl was basically kept at 5000 yuan / ton, most of the manufacturers were in a loss situation, only some of the well-equipped units could maintain marginal benefits 。 The price of caprolactam rose steadily from May to June, and the difference between benzene and hexane in June expanded to around 7000 yuan / ton. The profits of caprolactam enterprises continued to improve, making up for the loss in the first quarter.

The second part is the prospect of market operation in the second half of the year

In order to cope with the impact of the epidemic, the world has launched an unprecedented wave of monetary easing, and has taken positive and effective fiscal measures. In the second half of the year, the overall trend in the world is still to re open the economy. However, the impact of the epidemic has not been far away. There are still uncertainties in the prevention and control of foreign epidemic situation, the implementation degree of oil production reduction agreement of oil producing countries, and the return of foreign trade orders. In the second half of the year, we still need to guard against the invasion of potential short-term bad effects. Therefore, it is expected that the demand recovery will be accompanied by short-term disturbance in the second half of the year.

one Global economy is hard to get out of deep recession

Global economic activity in the first half of the year led to an unprecedented downturn. The impact of the post epidemic era on the economy and the demand side will continue. The IMF released the latest world economic outlook report, which predicts that the global economic growth will be - 4.9% in 2020, 1.9% lower than the forecast in April; meanwhile, the global economic growth rate is expected to rebound to 5.4% in 2021, which is 0.4% lower than the forecast in April. However, the IMF predicts that China's economic growth in 2020 is expected to be the only major economy in the world to achieve positive growth. According to the third quarter economic and financial outlook report of the Bank of China, in the first half of 2020, China's economy suffered the most serious impact since the reform and opening up due to the impact of the new epidemic situation and the global economic slowdown. GDP in the first quarter decreased by 6.8% year-on-year; in the second quarter, decisive achievements were made in the prevention and control of the epidemic situation. The "six guarantees" policy was launched, and the national economy showed a comprehensive recovery trend. It is estimated that GDP in the second quarter will grow by about 2.8%. China's economy will continue to recover in the second half of the year. However, there are also hidden dangers, such as the rebound of the epidemic situation, the increase of production and operation difficulties of enterprises, and the increase of local debt risk. GDP is expected to grow by about 5.2% in the third quarter and 2.5% in the whole year.

two Global aggregate demand remains weak, foreign trade demand weakens in the second half of the year

5-6 In June, with the release of the positive expectation of the economic reopening in Europe and the United States, there was a general preference for domestic and foreign demand expectations. However, after the United States was unsealed, the epidemic situation rebounded in many states, and the risk of a second outbreak was high. And South America, South Asia, Africa and other regions have become new storm eyes, and the drag of the epidemic on the global economy will be long-term. The actual resumption process in Europe is slow, and the return of textile and garment orders is not as expected.

The impact of trade friction continues. After the epidemic, the US China trade relations are still not optimistic. In addition, the recent Indian port closure tariff has increased from 15% to 35%, and the customs clearance monitoring is more strict than in the earlier stage, and India's foreign orders are basically in a stagnant state.

Therefore, the foreign trade demand in the second half of the year is expected to return to reality. It is expected that China's textile export will still mainly rely on epidemic prevention materials in the second half of the year, and the clothing foreign trade orders will be a weak repair process.

three The domestic consumer market is expected to continue to improve

Affected by the epidemic situation, the total retail sales of domestic consumer goods decreased by more than 20% from January to February. In the later stage, with the improvement of epidemic prevention and control in China, the pace of enterprises resuming business and resuming the city was accelerated, and the living order of residents was obviously restored. Total retail sales shrank by 2.2% in May. In particular, under the promotion of policies such as expanding domestic demand and promoting consumption, it is expected that residents' consumption will continue to improve in the second half of the year.

Domestic consumer goods in 2020-6

Source: Longzhong information

four Supply and demand pattern forecast of industrial chain

Table 3 production plan of caprolactam and PA6 in the second half of 2020

Unit: 10000 tons

Source: Longzhong information

According to the information, the production capacity of caprolactam will be 480000 tons in the second half of 2020, and the production capacity will be 680000 tons in Jiangsu. Due to the sharp contradiction between the supply and demand of Paxi polymer chips, Fushun group plans to put 60000 tons of new production capacity into production, and the production capacity of 60000 tons of Paxi is still to be put into production.

In terms of downstream demand, in the first half of the year, due to the sharp decline in domestic consumption from February to March, the domestic demand for textiles and clothing shrank significantly, and the demand for nylon filament decreased significantly year on year. According to Longzhong information statistics, in the first half of 2020, the average start-up of nylon filament is 67%, which is 11% lower than that of the same period last year.

Figure 7 Comparison of nylon filament start-up in 2019-2020

Source: Longzhong information

With the continuous improvement of domestic consumption in the second half of the year, the demand for autumn and winter clothing is still expected to be expected. It is expected that the demand for autumn and winter clothing will gradually start after August, and the decline of nylon filament production in the second half of the year will be narrowed. In other aspects, the demand performance of engineering plastics, fishing net and film was fair. For the whole year, it is expected that the overall demand for caprolactam will shrink slightly in 2020.

five The expected shock of cost side is strong

Fig. 8 schematic diagram of international crude oil price trend forecast in the second half of the year

Source: Longzhong information

From the international market point of view, major overseas institutions generally hold a more cautious attitude towards the international crude oil market in 2020. Most institutions have raised concerns about demand expectations and unexpected events. Although the international oil price rebounded from May to June, it does not mean that the upward channel has been completely opened, and it is still necessary to guard against potential negative effects in the second half of the year. OPEC+ Production reduction and the output performance of the United States, the progress of overseas epidemic situation, and the uncertainty of global economic and trade situation are several important aspects worthy of attention in the second half of the year.

To sum up, Longzhong information believes that crude oil prices are expected to decline slightly and then stabilize in the second half of the year, with Brent futures operating in the range of $37-55 / barrel.

Pure benzene: due to the high pressure of port inventory in July, the pressure of pure benzene market was weak. In the second half of the year as a whole, due to the poor profit of foreign PX units, the enthusiasm for the start-up of aromatics combined units in the later stage may decline. Compared with the prices of crude oil, styrene, caprolactam and other downstream products, pure benzene is still at a relatively low level, and the bottom support has been formed. In the third quarter, domestic pure benzene is expected to enter the process of de stocking and slow price increase. In the fourth quarter, the ideal market still has room for further upward movement. Overall, it is expected that the operating space of pure benzene price in East China will be 2850-4200 yuan / ton in the second half of the year.

five Forecast of caprolactam market operation

      Generally speaking, the caprolactam market in the second half of the year is still a game between demand and supply. The supply side still has new capacity to release. The demand side mainly hopes to rely on the return of domestic autumn and winter clothing demand from August to September. The foreign trade demand is weak in the whole year. It is expected that the annual terminal demand will shrink slightly in 2020. Therefore, the market competition pressure of caprolactam and PA6 in the second half of the year is still large, and the demand is still high The imbalance between supply and demand caused by shrinking, new production capacity and high start-up at the supply side still needs time to be adjusted and digested, which will also limit the rise of product prices and industry profits in the second half of the year. It is expected that the industry as a whole will operate with breakeven and low profit.

In terms of price trend, it is expected that the market will be under pressure in July, and the market will be repaired again under the support of domestic demand from August to September. However, we still need to pay attention to the adjustment of imbalance between supply and demand caused by the production of caprolactam in Shenma phase II and the return of Jiangsu Haili supply in August. After the fourth quarter, the support on the demand side will weaken and enter the cost led situation again. It is expected that the caprolactam price range in the second half of the year will be 9500-11500 yuan / ton, the price range of PA6 conventional spinning chips will be 10000-12000 yuan / ton, and the price range of PA6 high-speed spinning chips will be 10800-12800 yuan / ton.

two thousand and twenty In the first half of the year, difficulties or confusion have passed.

two thousand and twenty In the second half of this year, we need to be positive in the process of economic demand recovery, but also need to strengthen confidence and go against the wind in the short-term disturbance.