Demand Is Improving. Inflection Point Is Not Yet Needed. Crude Oil, Polyester And Grey Fabrics Need To Be Cautious.

On Monday, the market set a new record: the US Dezhou West light crude oil futures WTI price in May not only reached a record low, but also dropped to a negative value, and finally closed down more than 300% at the closing price of -37.63 dollars per barrel. It can be said that everyone, including traders on Wall Street, exclaimed, this is an unheard of market trend.

With only one day left for the delivery date, the market forced traders to go to a blind alley: if they do not move, 1000 barrels of crude oil per hand must be stored locally. Not to mention that the global storage space is coming to the limit, even if it can find local storage, the cost will be very high.

If the futures are moved to June, the futures price will be above $20 in June, while the futures price in May will be negative, so that the loss caused by the historical high price gap will make no one move to the warehouse. So what to do? There seems to be only one way left for Wall Street: sell! No matter what the price is, it must be closed.

Therefore, this is why, after the afternoon of the US stock market, we saw the rapid fall of the WTI oil price and the record of record breaking.

On another level, negative oil prices mean that the cost of transporting oil to refineries or storage has exceeded the value of oil itself. Because the losses caused by the closure of an oil well are enormous. Therefore, in order to maintain the normal operation of the oil well, some large American shale oil producers are willing to pay the cost of crude oil to deal with the crude oil when they are faced with no stock. This is the so-called negative oil price.

So what does this mean for the entire petrochemical industry?

1, small and medium-sized oil companies are facing the risk of bankruptcy.

Big oil companies will surely face losses. In the US stock market, Chevron and Exxon Mobil Corp both fell by more than 4%. The energy sector fell by 3%, leading to the S & P 500 index. At the close of US stocks, the Dow Jones Industrial Average fell nearly 600 points, down 2.44%, the S & P 500 index dropped 1.79%, while the Nasdaq composite index fell 1.03%. Meanwhile, the VIX index, which measures market panic, has risen by nearly 15%.

In fact, perhaps the market is more frightened by the large bankruptcy of small and medium-sized enterprises in the oil industry. Last Monday, a senior executive at a Texas oil cracking company revealed that last year, the company's annual revenue was $40 million, and now it has been thankful to earn $500 thousand a month. Now the company can only rely on government subsidies to survive, and the number of layoffs is 60%. For these small and medium enterprises, whether they are 5 dollars, 1 dollars or negative oil prices are meaningless, because the three words of "survive" are no longer dependent on the market.

The operator said he only hoped that his clients would not go bankrupt every day, otherwise the contracts would not be returned. Under the heavy oil prices, the crisis faced by big enterprises is far less than that of small and medium sized oil companies already unable to borrow. If more SMEs go bankrupt, the energy industry will see the Domino effect in the market.

2, a large influx! Asia becomes a dumping ground for global chemicals

Since the outbreak of the new crown pneumonia outbreak, global oil and chemical trade flows have rapidly changed along with the epidemic situation. According to ICIS (Annex) report, because of the new crown pneumonia epidemic affecting the United States and Europe's economic trend is very optimistic, demand fell sharply, chemical products prices plummeted. The time of the end of the epidemic is uncertain. Asia, which is relatively slow, has become a dumping ground for chemicals around the world.

However, this does not mean that the flow to Asia can generate more profit margins. As Asia becomes a dumping ground, the pressure of competition in the Asian market continues to increase. Many petrochemical products have fallen to a historical low, and many arbitrage windows from the European Union and the Americas to Asia are closing rapidly.

The market is forced into a dead end. Are you ready for a big break?

Recently, the market has been discussing the problem of bottom hunting, but will it not fall again? Is there any bottom? Is there another bull market? Will it return to zero? This is the most recent problem. Oil prices continue to plunge a bit trance, the so-called double bottom has not formed, the power of the bull has been completely eliminated, leaving only a continuous panic. People in front of the bottom of the crude oil, the bottom of the polyester, the bottom cloth have no more funds available. What will happen next?

1, yarn: comprehensive construction has declined for 4 consecutive weeks.

According to statistical data, as of April 16th, the comprehensive utilization rate of yarn enterprises in China was 62.02%, down 0.91 percentage points. On the whole, in the environment of internal and external difficulties, the inferior environment of supply is prominent, and yarn start up has declined for 4 consecutive weeks. At present, new orders and sustainable orders are the life-saving medicines for the yarn enterprises. But with the former single digestion, the new textile enterprises are saving up, the downstream prices are low, the production and purchase is limited, and the textile enterprises in Shandong and Hebei have limited production in an earlier stage. The enterprises in Jiangsu and Fujian are preparing for the high warehouse, but the production reduction is about to take place.

2. Weaving: looms start up for 5 weeks.

According to statistics, as of April 16th, the national cotton textile comprehensive start-up rate was 40.55%, a decrease of 1.51 percentage points. In terms of air-jet looms, the average starting rate was 42.78%, and the ratio of the air-conditioner loom dropped by 1.11 percentage points. In terms of circular machines, the average starting rate is 38.32%, and the ratio is 1.90 percentage points lower. As a whole, the demand for the terminal is asymmetric, and the orders of dyeing factories have shrunk dramatically. The situation of foreign trade and domestic trade enterprises is slightly different.

Foreign trade enterprises: at present, the epidemic situation in some European countries is stable, and the number of new cases has been slowing down, but the protection measures have not been cancelled. In addition, the United States has passed the peak period of new cases, but the epidemic has highlighted economic ills. Most of the customers are home office, and their efficiency is relatively low. It is difficult for domestic and foreign textile mills to export to domestic market. Although the order still unimplemented, the funds are becoming more and more tight after continuous storage.

In order to survive the difficulties, some workers have to take a rest and expect to remain half open to spend the month. At the same time, they are ready to take a big break in May. In view of the fact that no single connection can be made, the lower the price is, the worse it is. Some enterprises in Shandong and Hebei have been forced to shut down due to the cancellation of their orders.

Domestic trade enterprises: relative orders are relatively concentrated, continuing to 5.1, the problem is not big, the day is slightly better than foreign trade enterprises. In addition to doing epidemic prevention products enterprises, but also facing the problem of scarce orders. In addition, the domestic demand environment is becoming worse and worse, and the competitive pressure is rising. High inventory is exhausted and it is difficult to maintain the level of profit. Even though some enterprises take a short break in Qingming's pick up, but the market pressure is pressing, the risk aversion is enhanced under the tight financial situation, and the load of the machine is down again 10%-20%.

Through the above situation, it is easy to see that the textile industry needs to prepare for a long battle. Even though the development of the epidemic has been gradually controlled, it is still too early to relax the epidemic prevention measures and lift the ban, and the turning point of the demand for improvement is not yet. The breakage of the capital chain is often the root cause of the loss or even the pressure of the spinning enterprises. (source: CCTV finance, ICIS, long Zhong information)