The OPEC+ Reduction Has Disappointed The Market, And The Crude Oil Market Has Experienced A "Sharp Rise And Fall" Overnight. What Is The Next Step For The Polyester Industry Chain?

With the overnight OPEC+ special meeting giving the market a round of "startle", international oil prices experienced a conversion of 10% to 10%.

　　 (crude oil market is greatly affected by news. Source: Finance Union, TradingView)

After 7 hours of negotiations, OPEC+ finally confirmed a less than expected yield reduction agreement. OPEC+ will reduce production from 10 million barrels per day to two months from May 1, 2020, and reduce output from 8 million barrels per day to the end of this year from July, and 6 million barrels per day from April 22, 2022 January 2021 to April 22, 2022.

OPEC+ cut production less than expected to bring oil prices down.

Oil producers, led by Saudi Arabia and Russia, are trying to hammer out a yield reduction agreement to solve the increasingly severe oversupply problem in the global fuel demand of 30%. However, analysts said that the final reduction in OPEC+ may be lower than market expectations, adding that the demand caused by the recession triggered by the pandemic is too big and the problem is not easy to solve.

Investment banks and research institutions generally believe that a reduction of 10 million barrels per day obviously can not change the imbalance between supply and demand of crude oil.

Sandy Fielden, director of commodities research at Morningstar Inc, said that what happened tonight is as usual -- the plan for reducing production is very good, but the share of the details and the various countries is the real key. Let alone the role of G20 (energy ministers' Conference) is still a mystery.

Roger Read, an energy analyst at Wells Fargo, points out that until the exposure of social isolation measures in parts of North America, Europe and Asia, OPEC's production reduction measures can barely catch up with the demand decline.

Baird analyst Ethan Bellamy believes that the 10 million barrel / day cut is not enough to balance the market. For OPEC, the only way to use it is to use prices to push down other US high yield cuts. Considering that Russia still has more than $500 billion in reserves, there is indeed a capital price war for us oil producers.

OPEC and allies including Russia, known as OPEC+ group, have proposed a reduction of 15 million -2000 barrels per day, equivalent to 15%-20% of global supply.

However, the Minister of petroleum of Iran indicated that in May 2020 and June only the scale of 10 million barrels per day was reduced. From July 2020 to the end of the year, the production will be reduced by 8 million barrels per day, and the production will be reduced by 6 million barrels per day from January 2021.

John Kilduff, partner of Again Capital LLC, a hedge fund company, said that the number of production cuts they produced could not be completed, and the market had expected a lot of production cuts in the past few days. Oil producing countries need to remove mountains, and they may only move a small slope.

The daily production of 10 million barrels will be the largest reduction in production since the OPEC was founded, but Russia insists that only the United States will join the agreement and Russia will cut production. Other big oil producers such as Canada and Brazil have expressed support for the reduction in production, but these countries are now losing output due to market forces.

The United States has not said whether it will enforce mandatory production cuts. On the contrary, the United States says market forces have already led oil companies to cut production. By next year, U.S. production will be reduced by nearly 2 million barrels per day.

With the achievement of the new round of production reduction agreement, what kind of development will the polyester Market usher in?

Under the condition that both domestic and foreign trade are blocked, weaving enterprises are under tremendous pressure.

In terms of inventory of grey cloth, the inventory of grey fabric weaving in Shengze is about 41-42 days, and the market order has not improved.

　　 Under the pressure of huge grey cloth inventory, lowering construction has become the choice of most weaving enterprises. In the current weaving enterprises, the situation of two shifts is rare, instead of three shifts and four shifts. With the passage of time, if the order situation is still not improving, shutting down production has also been in the business plan.

From the capacity of weaving enterprises, we can see that according to the data monitoring of China's silk net, after the late March, the loom rate of weaving enterprises in Jiangsu and Zhejiang provinces did not rise or fall, but dropped to 72% in April 3rd, and the rate of opening last year was close to 9.

　　 With the continuous decline of the starting rate of weaving enterprises, how much money the weaving enterprises can afford to buy raw materials has become an unknown number.

Beginning in April 2nd, crude oil prices rebounded from low prices, polyester raw materials rose, polyester production and marketing appeared a rare "three Lian Yang". In this wave of market, some of the raw materials purchased are well run enterprises, some of them are more radical businesses, and some are raw materials traders. However, for some enterprises which are conservative in business strategy, there is not a lot of replenishment in practice, but they still keep the original strategy.

If the price of polyester raw materials in the future is driven by crude oil, though it may lead some weaving enterprises to buy raw materials in a short time, resulting in a wave of production and marketing peak, but in the long run, this trend is difficult to extend for a long time.

On the one hand, many weaving companies that want to replenish their products have made up the price of the polyester market that began in April 2nd. Most of the goods that are not replenished are those with more conservative management strategies. On the other hand, both domestic and foreign trade have been greatly affected.

Butterfly Effect in the global textile and garment supply chain: textile and clothing in spring and summer

In mid March 2020, Adidas announced that it temporarily closed the Adidas and Reebok stores in Europe and North America, while European stores closed in March 18th, while U.S. and Canadian stores closed in March 17th.

Another sports giant Nike also announced the closure of all offline retail outlets in March 15th. Nike retail outlets in Canada, Western Europe, Australia and New Zealand have been closed since March 16th.

The continued spread of overseas epidemic is another serious impact on China's textile and apparel enterprises. According to the third survey conducted by the China clothing association, 46% of the surveyed enterprises reflect that domestic orders have been greatly reduced, while export orders are also facing decline or cancellation. Logistics is blocked and the pressure is huge.

　　 "I was so anxious that I didn't sleep for three days. 1, February, China's epidemic situation is serious, factories can not produce, overseas customers rush orders, I panic. Now the outbreak of the epidemic in Europe and the United States, customers do not rush, start cancelling orders, or even postpone the order of -6 months in April, do not know what will happen next. Mr. Xu, head of a garment factory in Ningbo, told reporters.

In the early years, the company mainly provided fabrics for brands such as Europe, Holland, VERO, MODA, Zara and H&M, and the fabrics produced were exported to European countries such as Holland and Germany, as well as Dubai, Australia and so on.

Mr. Xu told reporters that a piece of clothing had actually traveled half the world before it came to consumers. "Korean and Japanese clothing companies have ordered their fabrics in China and transported them to their own garment factories in Southeast Asia to make their garments. Finally, the finished garments were transported to European and American countries for sale, which is a microcosm of the globalization of the apparel industry chain." Mr. Xu said.

According to WTO's data, China has been the largest textile and clothing exporter in the world for a long time, and China's clothing exports account for more than 35% of the world's clothing exports.

However, since the outbreak of the new crown pneumonia outbreak, according to the statistics of the General Administration of Customs of China, the export volume of textiles and clothing in China in 2020 1-2 was 29 billion 835 million US dollars, down 20% from the same period last year. Among them, exports of textiles (including textile yarns, fabrics and articles) amounted to US $13 billion 773 million, down 19.9% compared to the same period last year. Exports of garments (including garments and accessories) were US $16 billion 62 million, down 20% from the same period last year.

In a flash, it has entered the second quarter. The impact of the epidemic on products is first spring and summer clothing.

According to convention, before the Spring Festival holiday, the trade associations gradually shipped the order of spring fabrics, and began to busy the summer clothing materials after resuming work. But this year, an epidemic will compress consumption to the extreme, leading to the end of spring and summer clothing demand. The mainstream silk products in spring and summer are also in a situation of overcapacity. The manufacturers said that there were very few orders in the near future, and the amount of silk in the dyed factory was obviously reduced after starting. It is evident that the epidemic has disrupted all of the original production and marketing plans.

An old clothing enterprise in Tianjin told reporters: "the epidemic has hit us too hard. The cash flow on the account is negative. In order to keep up, some of our businesses went to the property department to ask for rent reduction. At the end of last year, several European orders were cancelled. No new orders have been received since the resumption of work. There are no customers in the shop. At present, we can only go through the stock by Taobao live. The original five partners are now left with me and another partner. "

Bad influence is still fermenting, and part of autumn and winter orders are also being cancelled.

In the first half of the year, we missed the best period of production, and the order of spring and summer fabrics was cancelled, so that we could accelerate the recovery in the second half of the year. Of course, the bad influence caused by the epidemic is still fermented in the market. In the short term, the market is still suffering from the "lack of orders". Even part of the autumn and winter fabric orders have begun to be cancelled.

Lee, a trader who exports to India, has revealed that a more than 10 thousand M imitation memory fabric on his hand has been exported to India and is being stopped urgently when he is preparing to export. It happened in March 20th. Li said that in the morning of 20, the customer sent out the mail reminder, and in the afternoon he received the mail that India would suspend the order in 24 days. Li told Xiaobian that this batch of imitation memory fabrics is used to produce winter clothes.

Narendra Modi, Prime Minister of India, announced in March 24th that in order to cope with the outbreak of the new crown pneumonia, the "closed city" mode would be implemented nationwide for 21 days at midnight. Shipping time from China to India is about 20 days, and it does not affect India customers' receipt as expected. However, it is clear that the time of suspension is also considered when customers suspend orders. Once the resumption time is delayed, or will not catch up with the new winter dress, there may still be the cancellation of orders.

The epidemics of epidemics abroad continue until June and July, but pessimism is expected to continue until August. Nowadays, the abolition of orders in autumn and winter requires the attention of textile and clothing bosses.