Plastics: Fundamentals Are Still Weak, And The Rising Market Is Difficult To Sustain

Dec 06, 2022

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Last week, plastic continued the upward trend driven by macro sentiment and the stable rebound of oil prices.

However, judging from the current basic situation, it is still difficult to sustain the rising market. With the advent of the off-season of demand, the supply pressure remains, the monthly difference and the basis also gradually weaken, and the space for the basis repair is limited. 01 The contract is under the pressure of accumulation and delivery during the Spring Festival. If the price continues to rise, we can focus on the short selling strategy at high prices and focus on 1-5 anti arbitrage for arbitrage.

The subsequent market is faced with the contradiction between the capacity loss operation and the continuous repair of the commencement, the overall weak demand and the continuous de stocking. How to interpret the subsequent contradiction, or affect the price trend, and pay attention to the commencement and inventory trend.

Risk point:

Macro environment exceeded expectations, raw material prices exceeded expectations, and supply exceeded expectations

01

Price difference:

Both the monthly difference and the basis difference weakened slightly

On December 2, the plastic basis difference was 10 yuan/ton, and the price difference from January to May was 47 yuan/ton. Last week, the plastic price continued the upward trend, but the early high basis has been unable to maintain. Last week, the basis and monthly difference both weakened significantly. With the arrival of the off-season, the market transactions are also weak, and the market rebound may be difficult to sustain. In December, the market is gradually facing the delivery of 01 contract, and the delivery is overlapped during the Spring Festival. 01 bulls are facing the pressure of receiving goods, and the basis and the probability of monthly difference will continue to weaken.

02

Demand:

The seasonal off-season is coming, and the downstream construction is gradually declining

Last week, the commencement of agricultural film fell by 2% to 54%, the commencement of film fell by 1% to 52%, and the commencement of other industries was temporarily stable. In terms of agricultural film, the demand for greenhouse film continues to weaken, and orders follow up slowly. Except for the northwest and southwest regions, the commencement of plastic film in other regions remains low. In terms of film, follow-up orders were not smoothly followed up, and the commencement decreased slightly. In terms of pipes, the demand is gradually weakening, the order follow-up is limited, and the inventory of finished products is mainly digested.

03

Supply:

The output decreased month on month in November, and the domestic supply is expected to increase in December

Last week, the PE production enterprises started construction at 83.7%, up 2.05% month on month. The maintenance loss was 39800 tons, with a link ratio increase of 18000 tons. The maintenance loss was at a medium level. It is preliminarily estimated that the PE overhaul loss this week will be 44500 tons, an increase of 4700 tons month on month. Zhuochuang data, the domestic PE overhaul loss in November was 210400 tons, an increase of 48100 tons month on month, and the domestic supply decreased. It is preliminarily estimated that the maintenance loss in December was 177600 tons, with a month on month decrease of 32800 tons. In addition, some new units will be put into production this month, so the domestic supply is expected to increase, and the supply pressure may increase.

04

Import:

Import profit inversion has deepened and import arrivals have decreased

Last week, the domestic price narrowed, the external market trend was relatively strong, the linear import profit weakened, and the import upside down deepened. Judging from the current import arrival and previous transactions, the import volume in November or the whole year reached its peak. The import volume in the following December may have decreased compared with November. The short-term import pressure has eased slightly, and the supply pressure is mainly from the growth of domestic supply. However, in the near future, foreign investors from the Middle East and the United States have offered more actively, mainly arriving in Hong Kong in January and February, when the import pressure may increase.

05

Inventory:

The production inventory has been accumulated, and the traders’ inventory has been slightly removed

As of December 2, the inventory of sample manufacturers had risen significantly, while the inventory of traders and ports had declined slightly. At the end of the month, some petrochemical companies stopped selling and settled. In addition, the downstream orders were flat, and the willingness to receive goods was not strong. The upstream inventory was accumulated, but the pressure was not great on a year-on-year basis. The merchants maintained the light warehouse operation. Although the performance of downstream orders was average, considering that the logistics cycle was extended, some low prices just needed to be replenished, and the traders’ inventory fell month on month. In terms of ports, the market turnover was average, but the number of imports arriving at the port decreased, driving the port inventory to decline slightly.