Metallurgy / Chemicals / Rubber & Plastics

After the Spring Festival holiday, the cautious procurement and the difference between upstream and downstream construction led to the pressure on the price trend of some chemical raw material-related futures, but the overall performance was still strong.

Many analysts believe that the chemical futures market has sent a positive signal to the industry, regardless of the trend of the futures price or the change of the price difference.

Chemical futures are surging stronger

A downstream chemical enterprise in Shunde, Guangdong Province, said in the price increase letter issued on February 3: "Although we have tried every means to raise a large amount of funds to stock raw materials before the festival, we regret that the stock of raw materials is still limited."

"After the 15th day of the first month, the market began to work again and the downstream petrochemical enterprises started to recover. However, in the face of the high price of raw materials, the enterprises' purchase intention was insufficient, and the demand was suppressed, and the price of some chemical raw materials fell down in a short time." A market person said that, taking the polyester industry as an example, the downstream construction was gradually recovering since the Spring Festival. The latest data showed that the springing start in Jiangsu and Zhejiang increased to 70%, and the loom start up increased to 60%.

"During the Spring Festival holiday, the upstream factories continued to operate, but the terminal production enterprises basically started after the 15th day of the first month. The difference in the pace of upstream and downstream operations led to a significant increase in the inventory of the upstream factories." The Shenyin Wanguo Futures Research Team pointed out that this is one of the reasons for the recent decline in futures prices such as PVC.

On the basis of the rise before the festival, the prices of some chemical raw materials fell back in the short term under pressure, but on the whole, they are still in an upward trend since the end of last year. According to the observation report of Huacheng Import and Export Data, as of the close of February 13, the main styrene futures contract has increased by more than 8% since December 2022. PVC and ethylene glycol, as the chemical futures products whose prices continue to weaken in 2022, their main contract prices rose by 13.6% and 7% respectively over the same period.

"The rebound in the price of chemical futures well reflects the market expectation of a stable and promising industrial chain." Pang Chunyan, chief analyst of CIC Anxin Futures Chemical, told China Securities News that the consumption of chemicals at the end, including textile and clothing, plastic products, household appliances and various plastic packaging, is closely related to our lives. The Central Economic Work Conference proposed that we should fully tap the potential of domestic market and enhance the role of domestic demand in promoting economic growth. This has released a signal to boost consumption, which is good for the consumption of chemicals.

In addition, according to the observation of Huacheng's import and export data, the recent price of styrene and other chemicals has ushered in a positive signal, which has been reflected in the recovery of the current market. However, the adjustment of public health policies and the implementation of relevant favorable policies will take some time to feed back to the downstream demand, and it will take time to test the optimistic expectations for the future.

Boost market confidence

In 2022, the basis price of ethylene glycol futures (spot price - futures price) will remain in a reasonable negative range as a whole. However, with the change of the supply and demand pattern of the spot market, the basis of glycol futures has strengthened from around - 100 yuan/ton to around Pingshui, that is, the forward futures price has strengthened relative to the near-month contract.

"This reflects the expectation that the forward price will hit the bottom and recover after the decline of the spot inventory. The futures market has sent the industry a signal that the market trend will become stable this year and boost the confidence of the production enterprises." Pang Chunyan pointed out that in 2022, affected by the consumption contraction of the terminal textile and clothing industry, the supply and demand of ethylene glycol is seriously unbalanced, and the processing profit level of naphtha integrated ethylene glycol continues to remain negative, with the annual average of - 212 dollars/ton. In 2023, the social and economic order will return to normal, and the downstream demand for ethylene glycol will be boosted, driving the profit of ethylene glycol production enterprises to improve, and the profit level is expected to rise. "The changes in the far and near monthly price difference of ethylene glycol futures reflect the expectation that the long-term supply and demand contradiction will ease this year, the ethylene glycol valuation will be repaired, and the industry will develop steadily and well," said Pang Chunyan.

According to the observation report of Huacheng Import and Export Data, since 2022, the fluctuation of overseas energy and chemical sectors has intensified, and the "negative gas price" has appeared in European and American countries for a time, and the international oil price has fluctuated violently. "Relatively speaking, the price fluctuation of domestic energy and chemical products is less than that of overseas products, showing a more stable and rational trend. Under the guarantee of the physical delivery system, the domestic energy and chemical futures market keeps stable operation, and the market structure is more balanced, so that the price fluctuation always operates within the controllable range of risk, providing confidence for domestic enterprises and market participants." said Jin Xiao, chief analyst of Dongzheng Futures.

"The economic data is good. It is generally believed that the center of gravity of the chemical market this year will be higher than that of last year. When the price is rapidly weakening, the market feedback is more positive." The above market participants said that the current inventory of finished products in the downstream chemical market is at a high level, and the price of raw materials is relatively high. Under the background, enterprises tend to be cautious in purchasing, and the inventory pressure of midstream traders is most obvious. Only when the demand improves and the pressure of traders is relieved, can the spot end provide more obvious support for the strengthening of the market, Huacheng Import and Export Data Observation Report.