A perspective on the ecological chain of rising chemical product prices
On the 7th, the day after Qingming Festival, the Yimao Information price evaluation system showed that the spot transaction price of PTA rose again by 50 yuan/ton, while the prices of its downstream products polyester filament and polyester chips increased by 300-500 yuan/ton.
This rise has started on March 8. “PTA started to rise at the beginning of March. After a slight consolidation from March 23 to 26, it continued to rise. There is no sign of weakness yet.” On the 8th, a PTA researcher at Yimao Information told this newspaper.
According to data from China Chemical Industry Network, the price of PTA has increased by 20% since the beginning of March. PTA is one of the important bulk organic raw materials and is widely used in various aspects of the national economy such as chemical fiber, light industry, electronics, and construction.
Not only PTA, but also PP, PE, resin and other bulk chemical products have increased by about 20% in the past month, and they have not stopped yet.
Has downstream demand really picked up?
Full Garden Spring
“Except for the surge in July and August last year, this round of rise is a good market I have ever seen.” Qi Junjie told this newspaper.
According to his introduction, the price of polyethylene has been on the rise since the Chinese New Year. After several waves of small market fluctuations, it has been rising since mid-March. The price of high-pressure products has risen from 8,500 yuan/ton to just over 10,000/ton. Prices for low-pressure products range from just over 8,000 per ton to as high as 12,500 per ton.
“From an industrial chain perspective, polyethylene, PTA, PP, PE, etc. belong to the same level of products and can be substituted for each other in some fields. The prices may be different, but from the perspective of the rise and fall curves, they are almost the same. Qi Junjie believes that since March, chemical products have generally seen a sharp rise in prices.
Not only bulk chemical products, but also fine chemical products are soaring along with the market. Ding Dafa, deputy general manager of Zhejiang Sunrise Fine Chemical Co., Ltd., told this newspaper that 80 of the 100 products it operates are rising, with an increase of 30%-50% compared to last year’s low.
Dindafa believes that reduced supply is an important reason for rising prices. “After the financial crisis, not only China, but also petrochemical facilities across Asia have plans to reduce production and suspend production. Market supply has dropped very quickly, which can It is said that this round of rise is a rebound from the bottom. In theory, it is normal to rebound by 10% or 20%, but many products have rebounded by more than 30%, which is puzzling.”
It is worth noting that the rise in chemical products is not In an independent market, the international price of crude oil, the ultimate raw material, has also risen from US$40/barrel in early March to US$54/barrel, an increase of 35%.
“An important factor in this wave of market conditions is cost push.” Liu Xintian of the China Chemical Network Information Center believes that when the price increase of downstream products is greater than the increase of crude oil, it means that the demand for chemical products has really started.
Another explanation for the cost push is that when manufacturers reduce operating rates, production costs cannot be better diluted, so they are also pushed up.
For middlemen, March is the month of confidence reversal.
The above-mentioned Yimao Information researcher said: “Before March, traders lacked confidence and tried to keep inventories as low as possible, and most of them even had short positions. But in March, due to the release of various favorable national policies, including the gradual increase in prices, As prices rise, traders begin to gradually increase inventories, and in the process of increasing inventories, prices are further pushed up.”
Destocking seems to have ended in the chemical industry. Dindafa told this newspaper that it was not only traders who increased their inventories in March, but upstream and downstream manufacturers were also gradually increasing their inventories, changing the operating model of preparing raw materials every day of production in the previous two months. “The inventory of each link alone can be enlarged 3-4 times after the confidence is reversed. The impact of this transaction volume on prices cannot be ignored.”
Price Increase Chain
However, data provided by Yimao Information shows that downstream demand has indeed picked up.
On April 3, the fabric production and sales of China Textile City [4.91 -3.16%] were 4.95 million meters per day. “According to normal conditions in previous years, the fabric output of China Textile City gradually rebounded after the Spring Festival, reaching 5 million meters per day 45 days after the Spring Festival.” said the above-mentioned researcher from Yimao Consulting.
A picture depicting fabric sales in China Textile City after the Spring Festival from 2006 to 2019 shows that although fabric sales after the Spring Festival in 2019 were sluggish with daily sales of 1 to 2 million meters, the sales dropped from 38 days after the Spring Festival The left and right began to rise, and by the 45th day, they almost intersected with the curves of 2006 and 2007.
According to reports, the production and sales of fabrics in China Textile City has also become a focus of the polyester market trend in recent years. Since it is between ready-made garments and downstream polyester, the speed of its change response reflects the trend to a certain extent. A change in demand in the downstream market.
“Everyone predicts that the future economic situation will not be very good, but the chemical industry has gone in the opposite direction. We are also confused. Has domestic demand really started and has the economy really picked up?” Zhong A senior official from Teng Chemical told this newspaper.
Sinopec feels more clearly about the rising demand. “In March, sales prices and sales volumes, including profitability, improved significantly,” a person from Sinopec’s Nanjing refining and chemical company told this newspaper. Although these data cannot be compared with 2019, they have basically reached the same period in 2005. level.
However, this person believes that the recovery in demand has obvious policy factors, and the real demand situation will be reflected after 5-6 months.
This person revealed to this newspaper that many large customers did increase their operating rates in March. “However, many companies are instructed by local governments to require large companies in the region to increase production schedules. Therefore, raw material prices and transaction volume have rebounded significantly, but terminal sales have not improved significantly, so this round of rise is likely to lay the foundation for a larger “Hidden dangers.”
“We cannot say recovery easily.” Feng Shiliang, secretary-general of China Petroleum [11.22 -3.77%] Petrochemical Association, told this newspaper that according to the data he has, about 40% of the oil prices in March were The prices of chemical products increased month-on-month, but about 80% of the products still saw a large year-on-year decrease. AAFYYTRUYJY76I
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