International oil prices fell again on May 23. The New York Stock Exchange oil price closed below US$90 a barrel for the first time since October 21 last year. In the 17 trading days since May 1st, the NYSE oil price has fallen in 14 trading days. Compared with the beginning of the month, it has fallen by 15% compared with US$106.16 per barrel. Affected by the drop in international oil prices, the price of chemical products has fallen over a large area for three consecutive weeks, and the downward trend continues. When will the reversal occur? Judging from the current economic situation, expectations cannot be overly optimistic. Whether it is an analysis from the perspective of cost or demand, the adjustment of the chemical market will continue, and the prices of chemical products will not be overstated.
From the crude oil point of view, its price once played a supporting role for the price of chemical products, and the current support is also quite “unusableâ€. The concern that Greece may withdraw from the euro zone remains a major factor in the pressure on the market. At the same time, the increase in crude oil inventories in the United States and the difficulties in progress in Iran’s nuclear talks, oil prices have punctured the support of 90 US dollars per barrel, and crude oil prices are likely to continue to fall. Affected by lower oil prices, prices of pure benzene, phenol, styrene and other products have dropped slightly for three consecutive weeks. Because there is a certain lag in cost transmission, if the price of crude oil falls further, there is still room for the chemical sector to continue to adjust.
From the perspective of demand, the low demand in the end of the industrial chain has brought great pressure on the market, and more and more products have joined the ranks of the overcast. The macroeconomic situation shows that the pattern of low demand is unlikely to change in the short term. China's economic growth slowed down significantly. In April, the new low credit supply during the year, the year-on-year growth rate of M2 dropped to 12.8%, weaker import and export data, and especially the industrial value added as evidenced by electricity generation, etc., fell sharply, indicating that economic growth experienced the first quarter After quickly falling back, it still maintains a downward trend. The World Bank reduced China’s 2012 economic growth forecast to 8.2% from the previously forecasted 8.4%. A further slowdown in the economy will reduce the demand for most chemical products and drive prices down.
From the perspective of supply, China's chemical products are generally in a state of excess production capacity. In particular, after the international financial crisis in 2009, a considerable portion of China’s 4 trillion yuan in investment went to the chemical industry, which had a quick effect, and chemical products such as pure benzene, phenol, styrene, tires, and chemical fertilizers were mostly in excess. Currently, some chemical products rely on compressed operating rates, and their market prices have not fallen sharply. However, this approach only delays the decline. In the chemical industry, there are many sub-sectors with excess production capacity. Since manufacturers cannot truly act in concert, “limited production and price protection†has always been a short-term behavior. Once the price is loosened, excess production capacity will drive prices down quickly.
Comprehensive current chemical product costs, demand and supply conditions, most chemical products may still have room for decline. Therefore, we must pay close attention to the oil price and the capacity-reduction process in the chemical industry. Only when the price of oil stops falling and the rate of operation of large companies rises and the price of products tends to rise, the best time to invest will come true.
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