Has the commodity turning point reached after continuous plunge? Raw materials rose by more than 70%

In April, the intensive voices of many ministries could not stop the rise in commodities! Recently, the supervisory authorities have paid close attention to the surge of commodities for two consecutive days, and commodities have plummeted for two consecutive days!

On Friday morning, the black futures products suffered a "cliff-breaking" setback! Among them, the main iron ore contract fell by more than 9%, approaching the limit. Thermal coal, hot-rolled coil, and thread fell by more than 7%. Coking coal and coke fell by more than 7%, rubber and asphalt both fell by more than 6%, and most other varieties fell.

Prices rebounded, and the polypropylene market ushered in a turning point?
After the Labor Day holiday in May, domestic polypropylene ushered in a wave of "counter-attack". The price rebound in the previous downturn drove the mood in the market. As of now, the average price of polypropylene wire drawing this week is 8833 CNY/ton, which is an increase of 424.74 CNY/ton or 1.94% from the average price of 8665 CNY/ton last week.

Crude oil gained momentum during the holiday period, which drove plastic futures to become popular and followed the rise, which under certain circumstances alleviated the haze atmosphere in the pre-holiday market. Secondly, upstream petrochemical companies raised the ex-factory price of polypropylene to provide support, and traders were more willing to ship. Thirdly, the downstream terminal demand has improved, the operating rate has rebounded, and the rigid demand is still there. So is this rebound in the market a turning point or a short-lived one?

▶Accelerated de-stocking of petrochemical companies to provide support with the increase in ex-factory prices

Up to now, the inventory level of major domestic polypropylene production enterprises has remained at about 750,000 tons, and the pace of de-stocking has accelerated. The overall inventory has been lower than the level of the same period last year. At present, it seems that there is not much inventory pressure. Moreover, the ex-factory prices of upstream petrochemical companies continue to increase after the holiday, which shows the willingness of petrochemical companies to support the market. Well-controlled inventory levels and ex-factory prices of petrochemical companies have provided support factors for this market rebound.

▶The downstream construction started slightly increased, and the overall situation was slightly adjusted

As of this Thursday (May 13, 2021), the domestic polypropylene downstream operating rate has increased after the holiday. Some BOPP companies ushered in corporate overhauls, and the start-up load decreased. As of May 13th, the operating rates of plastic woven and injection molded products were 57% and 56%, respectively. Due to the fact that orders were not completed during the holiday, some companies followed up on orders after the holiday, which caused a rebound in the start of work.
Although the downstream start-up has improved, the overall order situation is still not optimistic. There are still some factories that have accumulated inventory of finished products, and the start-up in the later period is unstable. Downstream players operate cautiously and purchase on demand.

▶Futures rise after the holiday, stay on the sidelines
In terms of futures, after the market turned red, it stimulated the industry's mentality and also had a certain boost to the spot market. After the rebound, the volatile trend is maintained, and the subsequent market is not stable. The domestic polypropylene market has been in the state of the capital market for a long time, adding a wait-and-see atmosphere to on-exchange transactions, and the industry is hesitant to stay on the sidelines.
From the current fundamental perspective, there is no obvious benefit in terms of supply and demand, and the boost to the market outlook is limited. In the short term, it may still maintain a volatile trend, and the follow-up development remains on the sidelines.

On the whole, on the cost side, crude oil is expected to enter the adjustment stage, which will loosen the cost support for polypropylene. On the supply side, the number of new overhaul devices in the later period is limited. Although there are plans to start production of new capacity, the overall impact on the supply side will not be significant. In terms of demand, the downstream terminals are currently operating relatively smoothly, but they are more cautious, focusing on meeting demand, without considering large quantities of stocks, and follow-up demand is limited. In the short term, the domestic polypropylene market may enter an adjustment stage.
Supported by crude oil, raw materials soared 73%
Affected by the recovery of global inflation and demand, crude oil has a firm trend in the first five months of 2021, gradually climbing from last year's low, driving raw material quotations to rise sharply.

▶Crude Benzene: a straight line up in May! Increased by over 18%!
Crude oil prices continued to improve + destocking + demand growth exceeded expectations, coupled with the suspension of production and maintenance of some devices, after the holidays, the crude benzene industry chain performed brilliantly, returning from the holiday, the linear rise, a strong supplementary increase! On May 13, the mainstream price of crude benzene was 5934 CNY/ton, a daily increase of over 7%. From April 30 to May 13, crude benzene rose 18.08%.

At present, the prices of hydrogenated benzene and pure benzene are at a high level, returning to a high of 8,000 after a lapse of 4 years.
▶N-Butanol: Rmb 3,000 in 3 days, 24% after the holiday!
After the festival, the n-butanol unit was overhauled, and downstream users of butyl acrylate just needed to purchase raw materials. With steady increase in demand and tight spot supply, the n-butanol market is in short supply, and factory offers have been rising all the way. As of May 14, the Shandong market price of n-butanol was 16000-16100 CNY/ton.

The growth of the industry chain is also very obvious. According to the data in the figure, n-butanol has risen by more than 73% in the past three months, and isooctanol by more than 50%.

▶Chemical fiber raw materials: another 2,000-3,000 CNY/ton!
According to market news, after May, a spandex manufacturer raised the price again by RMB 2000-3000/ton. The price of spandex has now risen to 64,000 CNY/ton, and downstream companies have basically adopted a purchasing strategy of “use and buy”.

▶Silicone: After the holiday, the minor tune will rise!
According to news from the Global Silicone Network, after the holiday, major monomer companies raised their silicone ex-factory offers, and the prices of various products generally rose from 300 CNY/ton, and some brands with tight supply models increased by 500 CNY/ton.

Prices have skyrocketed, downstream companies reappearing "wonderful" operations
Since the beginning of this year, the price of chemical raw materials has been soaring and rising continuously. In the chemical raw material market, various "exotic" phenomena such as suspension of sales, panic buying at auctions, cancellation of orders, a single price, limited sales, and quotations that only remain valid for half a day have appeared in succession.
▶The quotation is not clear, a single negotiation, the invoiced price shall prevail
Xuchang Weifeng Plastic Powder Technology Co., Ltd. issued a letter stating that the sales price will be adjusted across the board from now on, and new and old customers will no longer be notified one by one. The invoiced price of the sales list and the receipt of goods shall prevail.

▶The original order is invalidated, and the supply is stopped
A polyester resin company stated that due to the limited supply of goods, customers with good payment will be given priority from now on. If the futures payment cannot be paid overdue, the original order will be invalidated and the supply will be stopped.

▶Suspend orders, no quotation will be closed
Some resin companies stated that they have already sealed orders and will not accept new orders temporarily. Another company said that it will increase by more than 1,000 CNY/ton from the next day and will not accept large orders at present.
A raw material company stated that because the price of the raw material (isobutyraldehyde) fluctuates too much, the company has closed the offer without quoting.

▶Does not accept inventory orders, how much to place and how much to do
Some resin companies issued a notice stating that almost all materials are currently severely out of stock, and suppliers do not offer quotes, accept orders, and cannot purchase products. With immediate effect, all orders are not accepted for inventory orders, how much you place, how much you make, and how much you send, and give priority to honest customers.

▶For cash transactions, some customers stop receiving orders and deliver goods

Shaanxi Lansheng New Material R&D Co., Ltd. sent a letter, customers who have not signed a valid contract with a guarantee clause: all cash transactions; customers who have signed a perfect contract: if the futures payment has not been paid, the order and delivery will be stopped until the payment is due After that, the implementation of the original contract will be resumed; new development customers: custom-made products, all will be produced after receiving the order after paying the deposit, or the prepayment will be produced and shipped.
The recent frequent occurrence of "black swan" events will have an impact on the supply and price of international crude oil, and in turn affect the product prices of the domestic petroleum industry chain and derivative industry chains.
Under anxiety, downstream customers are increasingly rushing to buy chemical raw materials, making the chemical market, which is already in short supply and rising prices, "exacerbates the situation." However, boosted by the price increase in the first quarter and the rush to buy in the second quarter, it may give rise to more "price increases" in the chemical industry.