2016 is the year of the transformation of chemical strength

First, the domestic LLDPE capacity is insufficient, and a large number of imports are needed. Statistics since 2003 show that the domestic PE import dependence is 45.76% on average and 42.64% in the first 11 months of 2015. The structural shortage of supply supports the firm LLDPE price.

Second, the domestic LLDPE production is relatively monopolistic, with production capacity mainly concentrated in the hands of petrochina and Sinopec, while the downstream production capacity is relatively dispersed. This industrial chain structure enables LLDPE enterprises to have strong pricing power. Once the price falls, LLDPE enterprises can limit the guaranteed price of production. In the PTA industry, due to overheated investment in previous years, PTA capacity increased sharply, and the annual capacity growth rate from 2011 to 2014 was 31.11%, 56.83%, 4.69% and 31.62%, respectively. Affected by the decline in economic growth, the PTA terminal clothing demand is weak, which is transmitted to the downstream, and the growth of polyester demand slows down accordingly. The oversupply of PTA industry is becoming more and more significant. In addition, the capacity concentration of PTA enterprise is lower than that of LLDPE. In this kind of market, PTA enterprises limited production insurance price to the price support strength is not long.

However, looking into 2016, this pattern of strong LLDPE and weak PTA may be broken. By the end of 2015, the total capacity of domestic PE was roughly 15.39 million tons, and it is expected that 1.99 million tons of new capacity will be put into production in 2016, with a capacity growth rate of 12.93%. By the end of 2015, the total capacity of domestic PP was roughly 17.393 million tons, and the planned production capacity in 2016 was 3.61 million tons, with a capacity growth rate of 20.76%. In terms of PTA, only 2.2 million tons of Jiangyin Hanbang and 1 million tons of Sichuan Shengda are scheduled to be put into production in 2016, which represents a growth rate of only 6.82% compared to the capacity of 50.15 million tons.

In order to ease the dependence on polyolefin import, the country has been vigorously developing coal to olefin technology. In 2015, a large number of domestic coal-to-olefin units were put into production, but the collapse of crude oil price hit the coal-to-olefin industry and eased its impact on the polyolefin market. However, the large-scale production of coal-made olefin devices is irreversible, and this technological revolution will break the supply pattern of the domestic olefin industry and reprice LLDPE and PP. Some coal-to-olefin processes produce PE and PP at the same time, and the proportion of PP is higher than that of PE, so the capacity growth of PP will be higher than that of PE. In addition, after the rapid expansion of production capacity and price decline, the growth rate of PTA production capacity gradually slowed down. The bankruptcy of Far East Petrochemical is a sign that the survival of the fittest in PTA industry has begun.

Therefore, the author believes that 2016 is a year of chemical futures strong and weak transition, the past "weak" PTA will play a "Wang Hou Xiang Ning kind of", and "Wang Xie Tangqian" PE will "fly into the ordinary people", PP may replace PTA, become a synonym for short varieties.