my country is the world's largest producer of polyester staple fiber and a major consumer. Polyester staple fiber refers to the staple fiber obtained by direct or indirect spinning, stretching and cutting of polyester PET in a molten state. It is an important textile raw material.

On October 12, 2020, polyester staple fiber futures will be listed on the Zhengzhou Commodity Exchange. Its upstream links to the petrochemical aromatics and olefins industry chain, and the downstream links to apparel textiles. The listed varieties in the industry chain include crude oil, PTA, and ethylene dichloride. Alcohol, cotton, cotton yarn, etc. The listing of staple fiber has given the industry chain more arbitrage opportunities and strategies, and also connected the chemicals and agricultural products sector together.

The upstream and downstream relationship determines the high correlation

The product with the highest correlation with polyester staple fiber is PTA.

Polyester staple can be divided into virgin polyester staple and recycled polyester staple according to the different sources of raw materials. According to the production process, it can be divided into direct spinning and intermittent spinning. The demand can also be divided into spinning, filling and non-woven.

Since polyester PET is synthesized by PTA and ethylene glycol, no matter what kind of polyester short yarn, it needs to consume 0.855 tons of PTA and 0.335 tons of ethylene glycol per ton. Therefore, there is a direct relationship between PTA and ethylene glycol and polyester staple fiber. According to the weight, it can be seen that the correlation between staple fiber and PTA price is relatively higher than that of ethylene glycol.

Most of the downstream of PTA is used to synthesize polyester PET, but the demand classification of polyester includes filament and bottle flakes in addition to staple fiber. In 2019, PTA production totaled 44.854 million tons, and more than 95% was used to synthesize 49.989 million tons of polyester polymers. Among them, the output of virgin polyester staple fiber was 6.25 million tons, and the output of semi-dull polyester staple fiber for primary spinning that met the delivery quality was 2.92 million tons.

PTA futures was listed in 2006 and has been running for nearly 14 years. It is currently one of the most active and mature industrial futures. The listing of staple fiber has enriched arbitrage opportunities and has also attracted widespread market attention.

From historical data, the price correlation between raw material PTA and staple fiber in 2017, 2018, 2019 and January-September 2020 is 0.83, 0.94, 0.96 and 0.90, respectively. PTA price affects the price fluctuation of staple fiber The main factor. In the past three years, the price correlation between raw material ethylene glycol and staple fiber was 0.73, 0.24, 0.21 and 0.86 respectively.

Due to the upstream and downstream structure between staple fiber, PTA and ethylene glycol, the arbitrage relationship between the three also exists objectively. If 0.855×PTA+0.335×MEG and staple fiber prices are used for correlation analysis, the correlation coefficients in 2017, 2018 and 2019 can reach 0.84, 0.96 and 0.98, respectively.

It can also be seen from this that in recent years, the pricing direction of staple fiber has become more and more cost-oriented, and the fluctuation of staple fiber prices is basically consistent with that of raw materials. The staple fiber industry is currently mainly a seller's market. The seller sets prices through the cost of raw materials (PTA+MEG) plus profits, while the buyer's bargaining power is relatively low, so the price has a high correlation with PTA. This is determined by the current industrial structure. Because PTA futures are quite active and mature, and the basis trading method is highly accepted, it is difficult for upstream and downstream industries to be competitive if they do not participate in the futures market for risk management. When the staple fiber industry lacked futures before, the industry could only hedge raw materials based on its own production and sales, and thus invisibly developed into cost pricing.

In addition, the concentration of PTA, staple fiber and downstream industries is also the reason for this model. The PTA industry has the highest concentration, with CR4 reaching 64%, and the primary staple fiber industry with CR4 reaching 45%-50%. In contrast, the downstream is relatively dispersed, so the higher the upstream in the industry chain, the greater the bargaining power.

In the sales model of polyester staple fiber, the proportion of direct factory sales accounts for about 80%, and only 20% of the central consumer areas far from the production area use the trade agency model. In addition, spot goods accounted for 84% of the sales process, and contract goods accounted for only 16%. And most of them use a buy-in price.

However, this pattern may change to a certain extent after the listing of staple fiber futures. From 2020 to 2022, the PTA market will still have a large number of new capacity put into production, and the fundamentals of oversupply are a foregone conclusion. The listing of staple fiber futures also gives staple fiber companies direct risk management tools, which can directly hedge their value through staple fiber futures. It is also expected to form a basis trading method under the influence of PTA’s operating experience to help staple fiber downstream spinning Yarn companies can also carry out appropriate risk management.

The arbitrage strategy of PTA-polyester staple fiber or PTA/MEG-polyester staple fiber can help investors directly set up virtual factories in the futures market, and judge the trend of the price difference based on the basic supply and demand of polyester staple fiber. Even if the entity is unable to participate in the industrial integration from "a drop of oil" to "a silk", the listing of polyester staple fiber creates such a virtual opportunity for market investors.

Love and kill between substitutes

Polyester staple fiber has three major application areas, namely spinning yarn, accounting for 77%; non-woven fields such as wet wipes, masks, etc., accounting for 17% and only 6% of stuffed winter clothes, quilts, and toys.

Cotton and staple fiber blending can produce polyester-cotton yarn, and the polyester content in the common blending ratio ranges from 40% to 65%. And cotton yarn can also be considered as a substitute for polyester-cotton yarn. The three main sectors of the domestic cotton spinning industry are polyester, viscose and cotton. In recent years, the cotton market has been relatively squeezed by polyester. In 2019, the output and consumption of polyester have increased significantly, while cotton has declined.

When cotton prices fluctuate sharply, the demand for polyester staple fiber for blending may also change to adjust costs. The price correlation between virgin staple fiber and cotton is not as good as that of upstream raw material PTA, especially in the short-term and medium-term trends. The main reason is that staple fiber is a fully market-oriented commodity and the raw material cost is priced by crude oil; while cotton is an agricultural product, In addition to being affected by supply and demand, it is also greatly affected by national policies.

On the whole, the general trend of polyester staple and cotton is still similar. From 2015 to the first half of 2020, the correlation between the 1.4D polyester short spot and the cotton price index also reached 0.82. Since 2015, the price difference between the two has been higher than 5000 yuan/ton for most of the time, and the timing is greater than 8000 yuan/ton. very few. The price ratio of cotton to polyester staples usually fluctuates between 1.6 and 2.2. However, this year, affected by the epidemic and crude oil price fluctuations, the ratio has broken through a record high and is close to 2.4. The decline in the price of polyester staple fiber is also the reason why cotton has been replaced by polyester staple fiber in the spinning market since 2018.

In comparison, polyester staple fiber has a slightly better correlation with cotton yarn than cotton. However, the current activity of cotton yarn is not high. After the polyester staple fiber is listed, with the increase in the routes and strategies of arbitrage between varieties, it is also expected to increase the activity of each other at the same time like soda ash and glass.