According to data released by the National Bureau of Statistics on April 17, gross domestic product in the first quarter of 2019 was 21.3433 trillion yuan, an increase of 6.4% over the same period last year. Customs data show that from January to March this year, China imported 12168 million tons of crude oil, an increase of 8.2% over the same period last year, and 24.27 million tons of natural gas, an increase of 17.8% over the same period last year.

The Ministry of Commerce announced that in 2019, the allowable import volume of non-state-owned crude oil trade exceeded 200 million tons, reaching 202 million tons. Roughly estimated, in 2019, the import volume of non-state-owned crude oil trade may exceed 40% of the total import volume of crude oil. Two years ago, the proportion was still below 20%. This releases an important signal that China’s crude oil imports will continue to grow in the first half of 2019. Starting from April, with the start of spring ploughing in China, the demand for refined oil will gradually drive the demand for crude oil.

Internationally, the first quarter of international oil prices showed a volatile upward trend. International oil prices rose significantly in early January, reversing the market downturn at the end of last year. In the middle of the year, as the number of oil drilling wells in the United States hit its biggest decline in nearly three years, Sino-US trade negotiations reappeared and international oil prices rebounded again. In the latter part of the year, OPEC actively implemented the reduction of production and the decline in the number of oil drilling wells in the United States, which stabilized the fluctuation of international oil prices. In February and March, international oil prices continued to rise, Sino-US trade negotiations progressed smoothly, and OPEC cut production significantly.

According to OPEC’s monthly report, its output fell to 32.22 million barrels per day in March, due to production cuts and the Venezuelan crisis. The sharp decline in production has led to tightening of the oil market. OPEC lowered its average demand for crude oil to 30.3 million barrels per day in 2019 and increased global oil demand to 1.21 million barrels per day in 2019.

In addition, OPEC sources said that if oil production in Iran and Venezuela fell further and oil prices rose to $80-85 a barrel by June, oil producers could increase production.

At present, among the three major benchmark oils, the monthly difference of WTI has fallen, but Brent’s monthly difference is still strong. The EIA forecasts Brent crude oil prices to be $65.15 per barrel in 2019 (previously expected to be $62.78 per barrel), while expectations for $62 per barrel in 2020 remain unchanged.

Influenced by continued supply constraints, international crude oil futures prices rose again. Brent crude oil closed on April 19 at $72.01 a barrel, up 0.39%. The index has risen 32.98% since this year. NYMEX light crude oil rose continuously to $64.05 per barrel, up 39.84% in the year. Some analysts believe that at present, production cuts and geopolitics will continue to support international oil prices, but may gradually fall after summer.

Guangzhou Daily News (full media reporter Zhang Zhongan) “Stock market, commodities and other prices are rising. The rise in the stock market was mainly due to relatively loose monetary policy expectations. The rise in international oil prices is due to the decline in inventories, extreme supply and geopolitical factors. A Sunshine Private Equity Officer in Shenzhen said.

International oil prices have risen by more than 30% since this year

Reporters found that the recent international oil prices continue to rise, this year has been a cumulative increase of more than 30%, some varieties have increased by about 40%, and institutions are still in warehousing orders.

In the international market, the price of light crude oil futures delivered on the New York Mercantile Exchange in May rose by $0.24 to $64.51 per barrel, or 0.38 Per cent. NYMEX Light Crude continued to contract at $64.05, up 0.30%. Since this year, the index has risen by 39.84%. Meanwhile, London Brent crude oil futures for June delivery rose $0.39, or 0.54%, to close at $72.01 a barrel on the latest trading day. Brent crude oil also reported $72.01 in a row, a cumulative increase of 32.98% this year. In addition, the WTI crude oil futures index rose by 40.27% in the same period. In the domestic market, the cumulative increase of crude oil since 1906 has also reached 23.64%.

Private equity analysts have pointed out that crude oil, as a special commodity, has continued to rise since this year, mainly due to concerns about tight supply, including declining inventories and geopolitics leading to a reduction in oil supply in some oil-producing areas. According to media reports, data released last week by the Joint Organisation Data Initiative (JODI) showed that Saudi Arabia, the world’s largest oil exporter, lost 277,000 barrels of crude oil a day in February from a year earlier to 697,000 barrels. Wang Qiang, an analyst at Merchants Securities, said Saudi Arabia, Venezuela, Iraq and Iran were among the countries with the biggest output cuts in March, with Saudi Arabia’s daily output falling by 324,000 barrels per day annually, down more than 1.3 million barrels per day from the 11 million barrels per day record set in November last year. From the implementation rate of production reduction, the overall implementation rate in March has reached about 155%, and the overall performance is still expected by supermarkets.

In the week ending April 12, U.S. crude oil inventories fell by 1.396 million barrels, while the market is expected to increase by 2.3 million barrels, according to data released last week by the U.S. EIA.

OPEC’s latest monthly report in April showed that its crude oil production fell by 534,000 barrels per day to 3,022,000 barrels per day in March, the lowest since February 2015. Goldman Sachs raised its Brent crude oil price forecast for the second quarter of this year to $72.50 from $65 a barrel. The reason is that the macroeconomic risk-taking environment and changes in supply may push the spot price of crude oil higher. Huang Wentao of CITIC Construction Investment Securities also believes that OPEC production cuts and geopolitical risks increase, making the market optimistic about the development pattern of the crude oil market. At present, the supply of crude oil market is still tightening under the support of production restriction, and the strong situation of crude oil is expected to continue in the short term. He suggested that we should pay close attention to the monthly reports of the three major organizations in the later period.

However, Wang Qiang, an analyst with China Merchants Securities, believes that, in light of the overall supply and demand situation, there is little chance that the production reduction alliance will collapse in the first half of the year. Geopolitics has led to tight supply, and the release of shale production will still depend on the third quarter. Therefore, crude oil supply remained tight in the first half of the year. But the core of sustainability of current production cuts lies in the positive feedback of oil prices and production cuts. The implementation of the action has reached a very high level in March, and there is still some potential to continue to reduce production in some areas in the future, but the space for the reduction alliance to exceed expectations again is too small. “In the next 1 to 2 months, it is expected that the probability of diminishing marginal effects will be unavoidable.” Wang Qiang said. Goldman Sachs analysts also expect oil prices to gradually fall from this summer as shale oil and OPEC crude oil production increases.

According to Bloomberg News, the Organization of Petroleum Exporting Countries (OPEC) has succeeded in boosting oil prices through production cuts, but now OPEC is risking another victory by letting crude oil prices soar too high.

In the first quarter of this year, OPEC and its allies joined forces to cut production, pushing oil prices back to more than $70 a barrel, the biggest increase in nearly a decade.

Saudi Arabia, OPEC’s strongest member, has made it clear that Saudi Arabia is determined to maintain tight supply in the global oil market. Saudi Arabia’s move is likely to repeat the scene of 2018, when production cuts pushed oil prices to a four-year high, triggering strong opposition from President Trump and a hasty reversal by Saudi Arabia.

“It seems that OPEC is over tightening the market,” said Ed Morse, head of commodities research at Citigroup in New York.

Earlier this year, OPEC and its partners launched a new round of production cuts, when the rapid growth of U.S. shale oil production and the fragile growth of global demand seemed to lead to global oil oversupply. But because of OPEC’s production restrictions, coupled with further geopolitical squeezes on oil supply, the risk of global oil shortages has become greater.

The Times of India reported Wednesday that Saudi Arabia Amy, the world’s largest crude oil producer, was “seriously discussing” the acquisition of a 25% stake in Reliance Industrial Refining and Petrochemical Business, Reuters reported.

Reported that the sale of minority stakes may earn about $10 billion to $15 billion, the Indian company’s refinery and petrochemical business valuation is about $55 billion to $60 billion.

The Times of India quoted people familiar with the situation as saying that the valuation agreement could be reached around June. The report adds that Goldman Sachs is said to be authorized to advise on proposed transactions.

Saudi Arabian Crown Prince Mohamed Ben Salman expressed his strong interest in India’s largest refinery after visiting India in February, saying he expected more than $100 billion worth of investment opportunities in the next two years.

In addition, Amin Nasser, chief executive of Saudi Ami, met with Mukesh Ambani, chairman of Reliance Group, to discuss Ami’s business, including crude oil, chemicals and non-metals.

Crude oil futures rose slightly on Thursday as oil prices were supported by the decline in Saudi oil exports, the de facto leader of the Organization of Petroleum Exporting Countries (OPEC), and the decline in the number of active drilling rigs and crude oil stocks in the United States.

Brent crude oil futures rose $0.35 to close at $71.97 a barrel, close to Wednesday’s five-month high of $72.27. Brent crude rose 0.6% this week, the fourth consecutive week.

U.S. crude oil futures rose $0.24 to close at $64.00 a barrel, up slightly less than 0.2% this week for the seventh consecutive week.

According to the Joint Organisation Data Initiative (JODI), Saudi crude oil exports fell by 69.77 million barrels in February from 7.254 million barrels in January.

Data released Wednesday by the American Energy Information Association (EIA) showed that U.S. crude oil, gasoline and distillate stocks fell last week, and crude oil stocks unexpectedly fell for the first time in four weeks.

“I think it’s clear that supply tightening and demand growth concerns have subsided, pushing the market to a five-month high,” said Gene McGillian, vice president of market research at Tradition Energy.

The number of oil rigs dropped this week for the first time in three weeks.

Baker Hughes, GE’s energy services company, said in its weekly report that as of April 18, the number of active drilling rigs in the United States had dropped by eight. The report was released one day earlier because of Friday’s Good Friday holiday.

Strong U.S. retail sales data and good quarterly results from industrial companies have temporarily put global economic slowdown fears caused by poor manufacturing surveys in Asia and Europe behind.

However, the strength of the dollar limits oil price increases, and the strength of the dollar makes crude oil more expensive for global buyers.

The price of monoammonium phosphate keeps rising. The mainstream quotation of 55% powdered monoammonium in Hubei area is 2050-2100 yuan (ton price, the same below). The actual acceptance of manufactured ammonium has risen to 2000-2050 yuan, while the low-end remittance of 1960 yuan in the earlier period has been heard that the low-price has not been reached recently. The actual acceptance of 58% powdered monoammonium in Hubei province is 2100 yuan in the earlier period, which has been raised to 2200 yuan in the near future; the pre-quotation of 55% powdered ammoni Fifty yuan, and no bargaining, the recent offer rose to 2050 yuan. Overall, the price of Monoammonium has been raised by 50-100 yuan recently, and the actual turnover has risen by 20-30 yuan.

Prices are likely to continue to rise in the near future, but are they really strong enough?

Firstly, enterprises are more centralized. Recently, the stocks of ammonium enterprises in Hubei, Sichuan and other places have been gradually depleted. The stocks of large factories with over 100,000 tons of pre-stock have bottomed out in the recent period. Some factories still have about 10,000 tons of orders to be issued after depletion of stocks. Recently, many large factories in Hubei, Sichuan, Anhui and other places have suspended orders. Most of the orders to be issued can be executed until the middle and early May, and the enterprises are relatively concentrated.

2. Shipment in Sichuan is blocked. Recently, we have to mention the road repairs in Guangyuan area of Sichuan Province. The road repairs make some transport vehicles need to bypass and increase the distance. It is planned to resume operation at the end of June, but the specific time is still uncertain. Road construction has led to obstruction of transportation. The areas affected include Henan, Hebei, Shanxi, Shandong, Shaanxi and other areas in Northwest China. The freight of Monoammonium has also increased relatively. For example, the freight of Sichuan in Shaanxi in the earlier period is about 100-110 yuan, the freight of Sichuan in the recent period is 130-140 yuan, the freight of Sichuan in Shanxi in the earlier period is about 120 yuan, the freight of Sichuan in Shanxi in the recent period is about 165 yuan, and the freight of Shijiazhuang in Sichuan in Hebei Province is about 220 yuan from 180 yuan. If the arrival price remains unchanged, the freight rate will rise, and the factory price will fall in disguise, which will restrain the price increase of monoammonium.

3. The demand for high phosphorus fertilizer is still early. Recently, most of the compound fertilizer enterprises purchase raw materials for summer fertilizer, and think that the price of ammonium basically touches the bottom and the risk of purchasing is not high. Therefore, the enterprise has a high enthusiasm for purchasing monoammonium. The compound mast factories in Shandong and Lianghe have about 10,000 tons of replenishment. Enterprises in Northeast, Northwest and Southwest China have also made appropriate purchases. Especially some small and medium-sized compound fertilizer enterprises without raw material stock in the early period have stopped production after resumption of production Thousands of tons of Monoammonium were purchased. It is reported that the ammonium stock of raw materials in Henan compound mast plant can be used until the middle and early June. There is no new purchasing plan in the near future. In the later period, we will consider when to re-purchase according to the market situation. However, due to the early period of July and August from high phosphorus fertilizer, it is anticipated that in the short term, there will be no relatively concentrated plan for large quantities of ammonium purchasing by various compound fertilizer enterprises.

4. Fluctuation of raw material prices. The price of sulphur began to rise around the Qingming Festival. At that time, the price of granular sulphur in ports such as the Yangtze River rose again to more than 1000 yuan, but not for a long time. Because of the excessive rise and the rapid increase, the price of sulphur began to slow down in recent days. At present, the price of granular sulphur in Yangtze River Port and Fangcheng Port is around 1100 yuan. The price of liquid ammonia has also fallen after the rise, and has recently risen again, mainly due to the improvement of factory goods and the reduction of inventory. At present, the mainstream acceptance of liquid ammonia in Hubei has risen again to more than 3000 yuan, near 3030-3100 yuan. The price of sulphuric acid varies from region to region. For example, the production and transportation of sulphuric acid in Henan and other places are blocked due to environmental protection and safety inspection. The price has already risen and has been in the recent consolidation stage. Phosphorus ore prices have fallen by about 50 yuan or more due to increased supply.

In summary, due to the low inventory and some pending implementation of the plant, the price of ammonium may continue to rise, but due to insufficient demand and long distance from high phosphorus fertilizer, there is no chance of a substantial increase in the short term.

Under the boost of various positive factors, the price of crude oil has been rising unilaterally since this year. The main contract of NYMEX crude oil futures has now stood above the $64/barrel level, with a cumulative increase of more than 40%. Analysts said that OPEC + production reduction, Venezuela’s unstable situation will continue to support oil prices, oil market is expected to continue to rise in the second quarter.

Futures prices are rising unilaterally

Since 2019, the international oil price has shown a volatile upward trend. The main contract of NYMEX crude oil futures rose from around $45 a barrel to above $64 a barrel, an increase of $19 a barrel or 42.22%.

Analysts said that the sustained rise in oil prices was mainly affected by three factors:

First, OPEC + production cuts are being promoted. In the agreement reached at the end of last year, OPEC assumed a share of 800,000 barrels per day, not 400,000 barrels per day. After three months of production reduction, although the implementation of output reduction in Russia and other countries is not ideal, OPEC’s output reduction is very ideal, the overall implementation rate of output reduction is more than 106%. Driven by production cuts, the market supply has been significantly reduced, which has supported the strength of oil prices.

Secondly, the situation in Venezuela is unstable. The United States has continued to tighten economic sanctions against Venezuela, while Venezuela’s domestic power problems have emerged in an endless stream. The interruption of electricity has plagued Venezuela’s domestic production and life, especially the transportation of crude oil ports, which has prevented the export of crude oil.

Third, the economic situation has steadily recovered. On the one hand, the international trade situation has steadily recovered. On the other hand, after the Federal Reserve suspended interest rate hikes, other central banks around the world followed the Federal Reserve’s footsteps and adopted a relaxed approach. Of course, in addition to the central bank policy, a series of measures such as the rapid arrival and landing of China’s tax reduction policy have made the global economic situation recover steadily.

Posterior market probabilities continue to rise

Despite the rebound and good continuity of oil prices, the current price of $64 per barrel is still far from the high of $77 per barrel in the third quarter of last year. Zhu Guangming believes that the overall international oil price in the second quarter will continue the warming trend in the first quarter, and US crude oil will stand at $70 per barrel, not excluding the short-term access to $75 per barrel. The specific reasons are as follows:

First of all, the driving force of production cuts is still there. In addition to Saudi Arabia’s active production cuts, Russia may accelerate the pace of production cuts in the second quarter. The convergence of market views on supply cuts was the most important driving force behind the rise in oil prices in the second quarter.

Secondly, the situation in Venezuela is still unstable, and it is difficult for the country’s crude oil production to recover significantly.

Thirdly, the U.S. plan to exempt Iran from the oil embargo is uncertain, and the scope of the exemption may be narrowed.

Finally, the extension of the agreement deserves the attention of the market. In the current relatively low oil price situation, Saudi Arabia’s target for oil price is $70 per barrel. Therefore, due to concerns about the rapid increase in U.S. crude oil production in the second half of the year, Saudi-led production reduction should be postponed smoothly, which strengthens market confidence.

Analysts also said worries about economic weakness would largely limit the rise in oil prices, but the short term may not be the main factor compared with rapid changes in the supply side. Therefore, the upward trend of oil prices in the second quarter should not change.

Since April, the domestic methanol market has performed well as the spring inspection of the plant has been carried out, the coastal inventory has gradually declined, the inland price has been firm, but the port and futures prices have declined. The feeling is that the price of the port has fallen while keeping a lot of good data. Especially now the atmosphere of short-selling in the whole market is very strong, there is a lot of methanol falling unremittingly. So, which link is the problem, or the methanol market has been “demonized”!

Data are getting better

Since April, the domestic methanol data have been significantly improved. Among them, the start-up rate of domestic methanol plant decreased from about 73% in the previous period to about 65% in this week, and the spring inspection of large-scale plants was carried out on schedule. Prices in Northwest China have remained near 2200 yuan/ton for several weeks, with a discount of 2800 yuan/ton. Inventory in Northwest China has also been gradually reduced from 260,000 tons to less than 200,000 tons, which also includes 50,000-60,000 tons of raw materials in Jiutai’s new olefin plant.

Looking from the coastal areas, the total inventory of East and South China has dropped from about 1.1 million tons in the previous period to about 930,000 tons at present. Among them, the saleable inventory of East China has dropped from about 200,000 tons in the earlier period to about 130,000 tons at present, and has restored to a reasonable level. It is not easy to obtain such data under the condition that the short-term consumption of downstream is reduced due to the explosion accident of sound water in Jiangsu area.

Careful calculation shows that in the first quarter of this year, under the background of high start-up rate of domestic methanol plants and high inventory of products, the overall inventory can still be reduced. Demand has increased by more than 8% compared with the same period last year, indicating that downstream demand is very good.

Prices in coastal areas are falling

In April, the price of methanol in the port area gradually weakened, and it has become a “depression” of domestic methanol price. As of April 16, methanol quotation in Jiangsu was 2 380 yuan/ton, down 100 yuan/ton from 2 480 yuan/ton at the beginning of this month, a decline of 4%. Futures MA1909 contract closed at 2 471 yuan/ton, down 37 yuan/ton from 2 588 yuan/ton at the beginning of this month, a decline of 1.4%. Compared with other areas in China, the price of coastal ports is on the low side. Apart from 2200 yuan/ton quoted price converted to 2800 yuan/ton in Northwest China, 2250 yuan/ton quoted price converted to 2610 yuan/ton in Hebei, 2320 yuan/ton quoted to 2520 yuan/ton in Shandong and 2250 yuan/ton quoted to 2450 yuan/ton in Henan.

Up to now, the arbitrage window in East China and other regions in China has been closed. The arbitrage window in Northwest China has been closed with East China for as long as a month, and the South-North Jiangsu region once quoted the level water with East China.

Keeping a bunch of good things but falling

At present, the market for methanol interpretation of the current and future voices are many, but it is undeniable that a bunch of good data, prices have declined. Looking at the current interpretation of the methanol market, some voices are likely to be “extreme”. For example, some people think that the large-scale maintenance in Northwest China is “hypocritical”. I can’t understand how people repair, and then I return to the inspection. Others believe that the rapid depot of ports at present is “unexpected and unsustainable”, which is not a big problem. If it is good to land, it may be better.

The expectation for the future market is that maintenance devices will be centrally opened, imports will enter in large quantities, and inventories will reach a new high. Neglected expectations are that demand will also be released centrally, supply in the Mainland will be inadequate and dependence on imports will increase.

Coastal areas need to get used to the so-called high inventory

Recalling the last time methanol appeared in coastal high inventory of 1.2 million tons, domestic methanol to olefin plants are very few, and the annual apparent consumption of methanol in China is only about 30 million tons. Now the environment is that we are in a market with an annual production and sales of 60 million tons. In coastal areas, the methanol-to-olefin unit alone needs 45-600,000 tons of standing stock of raw materials. Statistically speaking, the last time there was a high inventory in coastal areas, many reservoirs were not included in the statistical scope, so the actual inventory is larger than the 1.2 million tons. This year’s actual situation is that although the scope of statistics has been expanded, there are still many stocks that have not been entered. If not for the tight storage capacity along the coast and queuing to unload ships, the actual peak value of methanol inventory will be about 130-14 million tons. It can be said that the first quarter of methanol depot is very successful. Moreover, coastal areas should be accustomed to high inventory in the future, because downstream factories expand capacity and increase stock, if the normal inventory in coastal areas is less than 800,000 tons, there may be a situation of unavailability.

Price spreads between the Mainland and East China may be closed for a long time

Arbitrage between Northwest China and East China has been closed for one month, but the Northwest China is still in a state of de-inventory, indicating that the demand of the mainland is increasing gradually. Overall, the demand of the mainland is very strong in the first quarter. Even if the formaldehyde starts to decline, the actual production and sales are also very considerable. Taking southern Shandong-northern Jiangsu as an example, the start of plate market this year is higher than last year. The decline of formaldehyde start-up in southern Shandong-northern Jiangsu caused the price of surrounding formaldehyde to soar. Goods from Hebei, northern Shanxi and Henan flowed into the area. In fact, the consumption of formaldehyde for methanol did not decrease, but increased.

For the Mainland, there may be a long-term closure of arbitrage with East China this year, mainly due to the new demand of the Mainland. Two sets of methanol-to-olefin units totalling 1.3 million tons were opened in Northwest China. Similar units were also installed in Shandong and Anhui provinces. The digestion and regionalization of methanol will be the main trend. Then the extension radius of imported goods will be expanded. It is an indisputable fact that the demand for imported goods will increase. For now, it is expected that by November 2019, the Mainland will not be able to open an arbitrage window with East China.

At present, the profits of imports have remained negative for more than a month. It is not valid to expect that futures will be depressed and port prices will be depressed, thus causing the decline of the mainland. If this logic is implemented, only importers will be injured.

Iranian devices are “innocent”

Since October last year, the Iranian device has been a constant “talk”. As soon as the price went up, the Iranian devices went out of order, and there were unexpected turnovers, even the expectation of early repairs. When prices fell, Iranian devices were amazingly good, and there were signs of driving the devices that had not yet been built. The same source even saw a massive overhaul of Iranian installations on Monday and a concentrated restart on Thursday. Both bulls and bears will make full use of Iranian devices thousands of miles away.

Market Needs Rational View

It is undeniable that in the first quarter of this year, the stocks of all kinds of chemical products are higher than the same period in previous years, but they are not high enough to make the market “crash”. With the rising prices of raw materials such as coal and crude oil, the value of basic chemical products has been underestimated and the profits of production enterprises have shrunk seriously. The author has met the market situation when consulting the last round of methanol fell to 1800 yuan/ton. To be frank, the power coal (621, -0.40, -0.06%) at that time was around 300 yuan/ton, and crude oil was around 40 dollars/barrel. At present, we are facing 600 yuan per ton of power coal and 70 dollars per barrel of crude oil.

At this time, to squeeze the small profits of production enterprises is somewhat unhuman, in other words, the space downward is extremely limited. But some people’s logic is very strange. They think that the basic aspects of chemical products can’t work. Then they go short of the chemical products and their raw materials. But when they get empty of coal and crude oil, they get stuck and start squeezing the profits of the production enterprises. They think that the profits of enterprises are very high and the profits are not high. They think that the industry is clear. Anyway, there are reasons.

At present, the market fundamentals are improving effectively, and the decline in inventory has proved that the supply and demand structure has improved. It seems irrational to find reasons to continue short the market at this time. The market needs to be treated rationally. Both the rise and fall have their inherent logic. The author does not want the irrational rise in the third quarter of last year, nor the irrational fall in the fourth quarter of last year. It is too biased to deliberately “demonize” a certain kind of product. What hurts is the fragile market, which is the vast number of enterprises.

Recently, the China Federation of Petroleum and Chemical Industries issued a report on the economic operation of the petroleum and chemical industries from January to February. From January to February, the economic operation of the petroleum and chemical industries was generally stable. The production of oil and gas and major chemicals in China has accelerated, the market has reached a bottom and stabilized, which is better than expected; foreign trade has maintained growth; investment has rebounded rapidly and consumption has increased rapidly. However, the downward pressure of the industry’s economic operation is still great; the market differentiation is obvious, and the momentum of recovery is insufficient; the cost is high, and the benefit is declining.

Rapid growth of energy consumption

From January to February, the operating income of the petroleum and chemical industries was 1.79 trillion yuan, a slight increase of 0.1% over the previous year, accounting for 12.1% of the operating income of large-scale industries in China.

The data show that from January to February, the apparent consumption of crude oil and natural gas in China totaled 160 million tons (oil equivalent), an increase of 10.4% over the same period last year, an increase of 0.8 percentage points over the same period last year; the apparent consumption of major chemicals increased by 3.9%, an increase of 4.2 percentage points over the same period last year.

Crude oil consumption increased, while natural gas slowed down slightly. From January to February, the apparent consumption of crude oil in China was 113 million tons, an increase of 9.3% compared with the same period last year, an increase of 2.4 percentage points and an external dependence of 72.7%. The apparent consumption of natural gas was 52.35 billion cubic meters, an increase of 13.2%, a decrease of 3.6 percentage points, accounting for 29.5% of the total apparent consumption equivalent of crude oil and natural gas, and an external dependence of 45.2%. From January to February, the apparent consumption of domestic refined oil was 52.5 million tons, down 2.1% from the same period last year. Among them, the apparent consumption of diesel oil was 24.538 million tons, a decline of 7.9%; the apparent consumption of gasoline was 21.727 million tons, an increase of 4.6%; and the apparent consumption of kerosene was 6.235 million tons, an increase of 0.5%.

Import and export trade keeps growing momentum

In the first two months of this year, import and export trade in the petroleum and chemical industries maintained a momentum of growth. Customs data show that from January to February, the total import and export volume of the whole industry reached 113.19 billion US dollars, an increase of 4.1% over the same period of last year, accounting for 17.1% of the total import and export volume of the whole country. Among them, total exports amounted to 33.38 billion US dollars, an increase of 2.7%, accounting for 9.5% of the total national exports; total imports amounted to 79.8 billion US dollars, an increase of 4.7%, accounting for 25.8% of the total national imports. The trade deficit between January and February was 46.42 billion US dollars, an increase of 6.1% over the same period last year.

In February, the total import and export volume of the petroleum and chemical industries was 49.58 billion US dollars, an increase of 1.3%. Among them, exports dropped by 9.5% to $13.59 billion, while imports increased by 6.1% to $35.99 billion. The total export volume of refined oil (steam, coal and firewood) was 4.48 billion US dollars, with a growth rate of 23.5%, accounting for 13.4%; the export volume was 7.842 million tons, up 27.5%.

From January to February, China imported 81.83 million tons of crude oil, an increase of 12.2% over the same period last year; the import amount was 35.91 billion US dollars, an increase of 3.9%, accounting for 45.0% of the total import trade of the whole industry. Imports of natural gas reached 24.150 billion cubic meters, an increase of 18.1%, and imports amounted to $8.46 billion, an increase of 46.6%.

Benefits of the petroleum and chemical industries have fallen sharply

Since this year, the benefits of the petroleum and chemical industries have declined substantially. From January to February, the total profits of the whole industry amounted to 81.91 billion yuan, down 37.3% from the previous year, accounting for 11.6% of the total profits of large-scale industries in the same period. The operating income cost per 100 yuan was 82.93 yuan, up 1.86 yuan from the same period last year; the loss area of the industry was 28.9% and increased by 6.1 percentage points from the same period last year; the total assets amounted to 12.5 trillion yuan, up by 5.7%, and the asset-liability ratio was 55.43%, down by 0.12 percentage points. From January to February, the profit margin of the whole industry’s operating income was 4.58%, down 2.74 points from the same period last year; the gross profit margin was 17.07%, down 1.86 points.

Among them, the benefits of oil and natural gas exploitation industry are basically stable, and the profits decrease slightly. From January to February, 293 enterprises in the oil and gas exploitation industry achieved total profits of 25.34 billion yuan, down 2.4% from the same period last year, accounting for 30.9% of the total profits of the petroleum and chemical industries. Among them, the total profit of oil exploitation was 18.78 billion yuan, down 6.1%, while that of natural gas exploitation was 6.75 billion yuan, down 4.8%.

Downstream Pressure Initial Upstream Production and Landing

At present, with the onset of Hengli PX production capacity, the weakening of PTA cost has become a foregone conclusion. At the same time, with the increase of PTA plant maintenance and the recovery of downstream polyester demand, PTA is expected to be phased out of stock. From the current market point of view, the supply of tight long logic and cost-side weakening short logic is still in the game. At the seminar on PTA industry chain Market Analysis in the second quarter of 2019, sponsored by Futures Daily in Hangzhou and supported by Zheng Shang Suo, the “big cafe” of various related industries analyzed the trend of PTA aftermarket from the specific situation of upstream and downstream.

Downstream Polyester Pressure is Initial

“The consumption of downstream polyester has a great impact on PTA supply and demand this year. The current supply is a “clear card”, but the growth rate of demand is not clear, it has a very big impact on PTA supply and demand this year is tight or loose. Wang Guangqian, research director of Ningbo Hengyi Industrial Co., Ltd., said at the meeting that from the point of view of the textile ecological chain, the pressure of excess warp knitting supply has begun to emerge.

In fact, according to Futures Daily reporters, China’s textile industry has a high degree of export-oriented in the past few years, with a large proportion of exports. However, in the past two years, the proportion of demand has increased significantly, and the proportion of exports has gradually decreased. Among them, domestic demand mainly includes three parts: textile and clothing, home textiles and infrastructure.

“Clothing accounts for the largest proportion of domestic demand. At present, with the end of the clothing replenishment cycle, it means that the growth rate of demand for raw materials will decline steadily. Wang Guangqian said that before 2016, the apparel industry was in the stage of de-inventory. We can see that the number of physical stores of apparel enterprises has been decreasing. Since the Hangzhou G20 Summit in 2016, garment demand has increased again, and the replenishment of the storehouse in 2016-2018 has stimulated the growth of polyester consumption. Clothing replenishment cycle is about 2 years. With the end of clothing replenishment cycle, the pulling effect on polyester raw material consumption is weakened.

Home textiles are closely related to real estate. Wang Guangqian said that with the end of the super boom cycle of real estate, the growth rate of demand for raw materials for home textiles will decline substantially. “Since 2015, this super real estate cycle (improvement + speculation + hardcover) is the main force driving the outbreak of home textile market demand. However, the real estate cycle has ended in the third quarter of 2018. The demand for real estate home textiles tends to weaken after replenishing the warehouse in the third quarter of last year. Warp knitting machines are the first to feel chill. The demand for real estate home textiles in 2019 will obviously slow down, and the demand for warp knitting will be difficult to improve. This means that the growth rate of demand for raw materials for home textiles will be greatly reduced. He said.

In fact, the pressure on the weaving sector brought about by the slowdown of terminal demand will first be reflected in the production profit, and then be transmitted to its own supply and the demand for raw materials. “At present, the profits of weaving and elasticity have been damaged, and the later stage will be the transition to the contraction of the supply side. In addition, it will also affect the enthusiasm of raw material stockpiling. Wang Guangqian said at the meeting.

On the export side, Wang Guangqian said that the growth rate of textile and apparel exports in the future is expected to remain low (negative growth). After the gradual easing of Sino-US trade frictions at the end of November last year, American apparel wholesalers made use of the rare time window period to replenish their stocks. As a result, the inventory-sales ratio of American apparel wholesalers rose sharply from December last year to January this year. Domestic orders were released sharply in early January, and the end weaving was in the process of catching up with orders throughout the first quarter. The consumption level of polyester raw materials was at a high level. After the polyester festival, the construction began at a high level, and the obvious inventory pressure was still not felt. Inventory transfer from polyester to weaving, and polyester inventory pressure transfer to terminal. “In view of the disappearance of the effect of centralized export rush in the first quarter, it is expected that the export data in the second quarter will be rather bleak, or maintain a low speed or even negative growth, and textile and garment exports throughout the year will be difficult to say optimistic.” Wang Guangqian said.

“With the slowdown of terminal demand, it is expected that the new capacity of polyester production will also slow down in 2019.” Wang Guangqian said that in the first quarter of this year, the growth rate of polyester production was around 9%, which implied a large overdraft of future demand. In his view, polyester demand will not sustain this growth rate in 2019. “It is estimated that China’s polyester production will reach 48.8 million tons in 2019, with a growth rate of about 7 percent.”

“If we estimate that PTA production will increase by 3.2 million tons and polyester production will increase by 9% in 2019, September will be quickly depotted and there will be a greater risk. If estimated by 7% growth rate of polyester production and 3.2 million tons of PTA increment, the supply-demand balance sheet will maintain a relatively tight balance and accumulate again in the fourth quarter. There will be no obvious gap between supply and demand as a whole, but there will be about 1.2 million tons of end-of-term inventory by the end of the year. Wang Guangqian said that from the point of view of demand, PTA supply and demand this year may be far less tense than you think.

The change of PTA industrial chain pattern will lead to profit redistribution

Since 2019, with the production and landing of Hengli and other enterprises, PX supply has introduced new forces, and the original supply pattern of PX will change. “ACP vendors and Suppliers account for about 30% of Asia’s production capacity and more than 50% of the negotiable trade volume. They have a strong voice in the price of PX. PX producers in mainland China are highly concentrated, with only seven suppliers, and the top five Suppliers account for more than 80%. With the production of Hengli and Zhejiang Petrochemical PX, the original supplier-led PX trade market pattern will be impacted. Qin Hao, PTA sales manager of Fuzhou Chemical Trade (Zhangzhou) Co., Ltd., said at the meeting that PX in Japan, Korea and other countries has a high dependence on the Chinese market and will face the impact of the replacement of PX localization in the future, while the newly built integrated devices in China have obvious advantages in production and operation costs, consumer markets and channels.

“PTA as a downstream product of PX, PTA production capacity in the last three years has almost maintained a stable level, almost no new capacity introduced, but there will be some changes in production. Although the industry is in a capacity-free cycle from 2015 to 2017, during this period, due to the slow downstream driving, output has maintained a steady growth level. Qin Hao said that the total effective capacity of PTA according to CCF statistics is 45.78 million tons. Yisheng, Hengli and Fuhua account for more than half of the total capacity. The growth of PTA supply in the next two years is basically based on the expansion of the original suppliers, and some downstream enterprises are mainly extended upward, the concentration of the whole industry will be improved.

Qin Hao said that in the next two years, Hengli, Xinfengming, Baihong and Yisheng will be decided to put into operation, so the expansion is mainly based on the internal expansion of the industrial chain. “After this round of expansion, the vertical integration of the whole industrial chain deepens, many enterprises have a more vertical and perfect supply system from upstream to downstream, which will lead to the production capacity of PX, PTA and polyester eventually become a mutual supply system within an enterprise or a group, and the cash flow to the market will be reduced, which will weaken the liquidity of some spot in a disguised way.” Qin Hao said.

In addition, the volatility of commodity prices will also decline. “Because after vertical integration, these enterprises have good means and tools to adjust and distribute profits. If there is excess profit in one link, these enterprises will use the tools they have to adjust and distribute profits among industries. Qin Hao said at the meeting.

It is understood that PX project has a long construction cycle, a large investment scale and a high access threshold; polyester fiber project has a shorter investment construction cycle, a smaller investment scale and a better profit, polyester new capacity can reach production faster. The characteristics of industrial investment determine that there will be mismatches during the adjustment of supply and demand in the industrial chain, which will lead to uneven profits. In fact, in the PX-PTA-polyester industry chain, profit distribution is closely related to the supply and demand pattern of each link and the upstream and downstream game of the industry chain.

“In the situation of shortage of supply, PX has considerable profits, enjoys the mismatched dividend of production capacity, PX sellers have the pricing power, PTA profits are always on the profit and loss line, and the factor restricting PX price upward is that the downstream tolerance of raw material cost reaches the limit level. Since September 2018, PTA industry has improved in terms of supply and demand, PTA profits have moved as a whole, PX seized the opportunity to occupy profit space, and profit space has increased. Qin Hao said that based on the deduction results of the profit background in 2018, the situation of PTA de-inventory in 2019 is difficult to reverse, and the corresponding profit level should gradually rise. Under the background of low inventory, PTA manufacturers have strong bargaining power, grasp the initiative of profit distribution in the industrial chain, and most of the profits brought by cost collapse should fall in the PTA factory link. The same profit background deduces that in the second half of 2020, when the monthly output of PTA new devices reaches more than 400,000 tons, profits will begin to decline.

In view of the future investment opportunities of PTA, Shen Ye, senior analyst of Yongan Futures PTA, said at the meeting that although the absolute price is difficult to speculate, there are more relative price opportunities. “Overall, PTA is in the upstream and downstream capacity expansion cycle, so industry profits are expected to expand, looking forward to this year’s processing fees; monthly PTA industry attributes and contract design particularity, the superimposition of its industry environment, set as a probability event; and absolute prices, after a sharp fall in 2018, speculative demand or weakening in 2019, but due to convergence Ester and weaving are still in the capacity expansion cycle, and the replenishment cycle has not yet ended, so there is still a pulse market stage. He said.