The probability of plastic bottom oscillation is large

- Apr 15, 2019-

Affected by the government's cut of value-added tax rate from 16% to 13%, the prices of industrial products all fell sharply in mid-march, among which the main contract of plastic futures fell by 2.55%.

From the technical point of view, the plastic futures have approached the previous low of 8130 yuan/ton, if this line does not provide effective support, the futures will continue to find bottom.


External factors influence frequently


In the near future, the large fluctuation of plastic futures price is largely affected by external factors.


On the one hand, the impact of the government's VAT cut, plastic futures face repricing, prices fell sharply.

After the market began to hype traders to make tax arbitrage and began to focus on stock, price by short-term support, but in fact because of centralized purchasing trade negotiating price ability is poor, and profitable, so in the process of purchasing the phenomenon of widespread price cuts and benefits, it has a negative effect on spot prices, and the centralized purchasing in the supply of goods face selling in April, but also formed the suppression of the plastic price.


On the other hand, Turkey's stock market, bond market and currency market all fell due to the collapse of foreign exchange reserves and the setback of market confidence in its economy.

This triggered a fall in capital markets in emerging markets such as Argentina, which had an adverse effect on commodity prices.

Later, US President Donald trump issued a statement saying that OPEC considered it necessary to increase the liquidity of global crude oil at a time when the global economy is very fragile and oil prices are too high.

Affected by this, international oil prices fell sharply, which further on the plastic futures have a repressive effect.

Overall, though, both the tax cut and trump's comments are short-term factors, with the impact on plastics beginning to wane as the market responds adequately.


Its fundamentals are weak


Due to its weak fundamentals, in addition to the industry profits can be, cost support is not obvious, so the trend of plastic futures is weak.


Supply side, the influence of the rising prices of raw materials, a sharp fall in the number of the domestic PE production profit, especially in the oil system of PE profits dropped significantly, the oil system of PE profit fell by nearly 4000 yuan/ton, near to 2000 yuan/ton, but coal PE profits in the vicinity of 2500 yuan/ton, well production enterprise's operating conditions, production enthusiasm has safeguard.

From the perspective of commencement, the load of domestic PE commencement in March was 86.21%, which was slightly lower than that in February, mainly due to the relatively intensive overhaul of domestic PE enterprises in March.

At present, most of the equipment for early maintenance has resumed production. Except for fushun petrochemical and zhongtian hechuang, the equipment for maintenance in April has a small capacity, so the supply in April is looser than that in March.


In terms of inventory, as traders earn tax margins, PE's petrochemical inventory has been declining recently.

As of March 22, domestic PE petrochemical inventory was 28,800 tons, down 6,700 tons from the end of February, down 18.76%.

It should be noted that although the petrochemical inventory showed a decline, but social inventory increased.

As of March 22, the domestic PE social stock was 149,600 tons, up 20,100 tons from before the Spring Festival, up 15.6%.

This shows that the current PE has not been terminal digestion, but from the petrochemical inventory transfer to social inventory.

In particular, with the arrival of the agricultural film consumption season in March every year, PE will enter the destocking stage, but this year's destocking has not started, PE supply and demand is still not optimistic.


In terms of demand, the overall operating rate of domestic agricultural film enterprises was 47% in March, up by 18 percentage points month on month, among which the operating rate of plastic film enterprises reached 70%.

However, the current plastic prices are low, consumption season did not stimulate the demand for plastic, downstream enterprises with buy and use strategy to maintain procurement.


To sum up, the external factors affecting the price of plastics in the early stage have been gradually eliminated, and supply and demand begin to become the dominant factors affecting the price.

At present, the plastic supply is abundant, the inventory is on the high side, the price is difficult to continue to go up, but in the demand season support, and do not have the possibility of a sharp fall, the recent oscillation bottom probability is larger.

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