Starting from mid-October, international crude oil prices began another round of rapid gains, and futures prices soared from US$85/bbl to over US$98/bbl in less than a month. From late November, futures prices have continued to fall back and are now back at about $88/barrel. In the past two years, international oil prices have had a great impact on the plastic raw material market. In particular, in 2006, plastic raw material prices almost simultaneously fluctuate with international oil prices. However, in the face of the sudden drop in oil prices within less than two months of the current round, the plastic raw material market has almost no reaction.
"Our order this year's profit is very low, because the raw material price is too high." Liu, a plastics product company in Dongguan, Guangdong, told reporters. The company mainly makes Christmas trees, mainly exports. “Customers refused to raise prices. We also took orders to maintain customers. The profits were poorly low. The raw material prices have always been very high. We can only use them and buy them. Because the profits are too low, we are now preparing for more holidays next spring festival. ".
The situation faced by Liu Boss represents the current status of a number of small and medium-sized plastic product companies in China. That is: the price of products cannot be raised → the profit is too low → forced to cut production or even stop production → raw material demand declines. The weakness of downstream demand has seriously affected the plastic raw material trading market. The high fluctuations in the variety of plastic raw materials have become the most common state of the trading market, and the reviews of each market have not forgotten to add a “light tradingâ€. In fact, this trading situation has been maintained for nearly two years.
From mid-2005 to the beginning of 2006, the price of plastic raw materials rose by more than 30%, allowing downstream companies to directly address the "unavailable." From April 2006 onwards, driven by domestic large-scale petrochemical enterprises, domestic prices of various types of plastic raw materials have generally increased sharply. By July of that year, the prices of all types of plastic raw materials rose by 10% to 20%. (International oil prices are also synchronized in the same period. The price of plastic raw materials fell back to October due to limited downstream capacity. Since then, the plastic raw material market has not experienced large fluctuations, showing the situation that “the peak season does not rise, and the off-season does not fallâ€. So far, no frightening ups and downs have emerged.
When international crude oil prices rose in October this year, just as the agricultural film production season started, traders in various trading markets were delighted to think that there will be a small upsurge in plastic raw material prices this year, but today, the downstream market is not salty. The weak response has basically completely shattered the enthusiasm of traders. “Don't dare to open positions, the amount of customer purchases is actually limited.†Mr. Mao of Yuyao, who has been in the plastic raw materials trade for nearly five years, told reporters.
What the reporter learned from the interview is also roughly the same. Some large-scale agricultural film production enterprises will prepare materials in advance during the peak season. However, as CNPC and Sinopec have implemented unified regional sales policies, most of these large-scale downstream enterprises can directly obtain goods from PetroChina and Sinopec's sales companies and bypass traders. This section, while the trader's main customers - small and medium-sized products companies, due to financial difficulties, most of them use the method to follow, and the transaction volume as a whole does not go. The shrinking of trading volume has made the price of crude oil, the most easily affected factor in the market, insignificant.
In general, the sluggish demand in the downstream and high resistance to high prices will lead to a drop in market prices. However, in fact, since October 2006, the plastic raw material market price has not changed much. The strong ex-factory price of PetroChina and Sinopec is an important factor supporting the high price of raw materials, and the high crude oil price is an important reason why manufacturers are unwilling to lower their prices. The supply and demand sides have thus formed a tussle. In the face of sluggish downstream demand, upstream companies can only maintain the status quo. In this context, the fluctuation of international oil prices will not have a significant impact on the market as before.
"Our order this year's profit is very low, because the raw material price is too high." Liu, a plastics product company in Dongguan, Guangdong, told reporters. The company mainly makes Christmas trees, mainly exports. “Customers refused to raise prices. We also took orders to maintain customers. The profits were poorly low. The raw material prices have always been very high. We can only use them and buy them. Because the profits are too low, we are now preparing for more holidays next spring festival. ".
The situation faced by Liu Boss represents the current status of a number of small and medium-sized plastic product companies in China. That is: the price of products cannot be raised → the profit is too low → forced to cut production or even stop production → raw material demand declines. The weakness of downstream demand has seriously affected the plastic raw material trading market. The high fluctuations in the variety of plastic raw materials have become the most common state of the trading market, and the reviews of each market have not forgotten to add a “light tradingâ€. In fact, this trading situation has been maintained for nearly two years.
From mid-2005 to the beginning of 2006, the price of plastic raw materials rose by more than 30%, allowing downstream companies to directly address the "unavailable." From April 2006 onwards, driven by domestic large-scale petrochemical enterprises, domestic prices of various types of plastic raw materials have generally increased sharply. By July of that year, the prices of all types of plastic raw materials rose by 10% to 20%. (International oil prices are also synchronized in the same period. The price of plastic raw materials fell back to October due to limited downstream capacity. Since then, the plastic raw material market has not experienced large fluctuations, showing the situation that “the peak season does not rise, and the off-season does not fallâ€. So far, no frightening ups and downs have emerged.
When international crude oil prices rose in October this year, just as the agricultural film production season started, traders in various trading markets were delighted to think that there will be a small upsurge in plastic raw material prices this year, but today, the downstream market is not salty. The weak response has basically completely shattered the enthusiasm of traders. “Don't dare to open positions, the amount of customer purchases is actually limited.†Mr. Mao of Yuyao, who has been in the plastic raw materials trade for nearly five years, told reporters.
What the reporter learned from the interview is also roughly the same. Some large-scale agricultural film production enterprises will prepare materials in advance during the peak season. However, as CNPC and Sinopec have implemented unified regional sales policies, most of these large-scale downstream enterprises can directly obtain goods from PetroChina and Sinopec's sales companies and bypass traders. This section, while the trader's main customers - small and medium-sized products companies, due to financial difficulties, most of them use the method to follow, and the transaction volume as a whole does not go. The shrinking of trading volume has made the price of crude oil, the most easily affected factor in the market, insignificant.
In general, the sluggish demand in the downstream and high resistance to high prices will lead to a drop in market prices. However, in fact, since October 2006, the plastic raw material market price has not changed much. The strong ex-factory price of PetroChina and Sinopec is an important factor supporting the high price of raw materials, and the high crude oil price is an important reason why manufacturers are unwilling to lower their prices. The supply and demand sides have thus formed a tussle. In the face of sluggish downstream demand, upstream companies can only maintain the status quo. In this context, the fluctuation of international oil prices will not have a significant impact on the market as before.
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