September and October are often the traditional peak seasons. Since the second quarter of this year, the pace of domestic resumption of work and production has accelerated, and policies to stabilize the economy have been issued frequently. The market is full of expectations for the performance in the second half of the year. However, August is already halfway through, and the expected demand recovery has yet to show signs of being realized. This should be the golden period for stepping up stocking, but the market has gone uncharacteristically, with current conditions such as “cautious purchasing”, “purchasing on demand” and “downstream weakness”, making this year’s Gold nine and silver ten may be ruined. Most bosses even bluntly said, “Just stay alive.” However, there are also people who are not afraid of the falling market and are buying up goods drastically.
The lack of orders is just a symptom:
Corporate inventories are accumulating, and many companies are suspending work and taking holidays.
“There is no ‘Golden Nine and Silver Ten’ this year.” Li Ming, the person in charge of a chemical trading company in Guangdong, said frankly, “Compared with the first half of this year, the current market has not improved much.”
“The market demand is not good now. 70% of our customers come from downstream terminal factories. However, the overall order volume this year has decreased by about 10%; for those companies that are only traders, the order volume this year has basically been cut in half.”
In his view, the lack of orders is just a symptom. In fact, it is the lack of driving force for the overall economy. Indeed, manufacturing data at home and abroad are currently weak and consumer demand is declining.
In terms of domestic terminal demand, since 2022, new housing starts and sales area, home appliance production, cloth/yarn production, etc. have been in an overall downturn; automobile sales data have also performed poorly but have certain resilience driven by new energy vehicles; the world’s major food crops Although prices have fallen, they are still at a high level since the second half of 2020. Overall, the demand for most chemicals in real estate, home appliances, textiles and clothing and other industrial chains is under greater pressure.
For example, in the real estate chain, glass inventory has continued to rise since the beginning of 2022, and the inventory level in early August was at the highest level in the past seven years; in the textile and clothing industry chain, the operating rate of the polyester filament industry has also continued to decline since March, and the operating rate fell in early August 60% to close to the lowest level in the past five years. The reduction in downstream orders has led to the accumulation of corporate inventories and sluggish production, with many companies suspending production and taking holidays.
From the perspective of foreign markets, the Q1/Q2 annualized rate of U.S. GDP in 2022 was -1.6/-0.9% respectively, entering a technical recession. Although it has not entered a substantial recession, high inflation, the Federal Reserve’s continued interest rate hikes and balance sheet reduction, geopolitical conflicts, Against the background of energy shortages and high prices, concerns about a potential recession in overseas economies have increased. Since the beginning of 2022, the OECD comprehensive leading indicators in the United States and the Eurozone have continued to fall.
Trends of OECD comprehensive leading indicators in major countries and regions around the world
Li Ming believes that current domestic demand has become saturated, and exports have supported the industry’s growth in the first half of the year. However, domestic exports may also be suppressed due to concerns about overseas recession.
Fan Lei, an analyst at Guolian Securities, said that China’s exports in July increased by 18.0% year-on-year (in US dollars), exceeding consensus market expectations. However, after seasonal adjustment, the absolute value of exports in July has begun to decline. At the same time, micro-level feedback shows that there is increasing evidence that the prosperity of the export sector has declined, including sluggish orders and insufficient business operations.
In addition, cost support was the main driver of the rise in chemical prices in the first half of the year. However, during the recession period, the price of crude oil/natural gas on the energy side fell. Therefore, the overall suppression of demand and the downward shift of the cost center inhibited the prices of basic chemicals.
Polyester demand recovery failed
There may be no more gold, nine or silver this year
From the perspective of the textile and chemical fiber industry chain, the orderly electricity consumption policy implemented in Zhejiang currently consumes a lot of electricity for texturing enterprises, and the inventory levels of enterprises are relatively high. Some enterprises have stopped and reduced their load, and the overall operating rate has dropped significantly. The demand increased slowly. After a temporary rise, the polyester filament yarn started to sell goods at a profit, and the focus of polyester filament yarn transactions continued to decline.
Taking POY150D/48F as an example, the current market transaction center is at a low level in the first half of the year. However, a look at the price trend in previous years shows that the market is still in a downward channel in August, and the start of large-volume orders in winter began as early as the end of August and the beginning of September.
High temperatures and production restrictions continue to torture downstream weaving
Business orders are severely reduced
From a downstream perspective, Zhejiang has successively implemented orderly power consumption policies, which will affect the supply and demand of polyester filament and downstream fields to a certain extent. Looking back at the impact of the power restriction policy in the third quarter of 2021, polyester filament and downstream fields will independently go to Treasury has boosted the market rebound. Can the market continue this year? Last year’s market rebound was mainly due to the increase in winter orders, in addition to the positive boost of supply reduction. However, this year’s terminal demand was affected by the epidemic, geopolitical crisis and other factors. Orders shrunk and some orders were transferred to Southeast Asia and other regions. Therefore, the supply reduction was not as strong as The market may remain stagnant due to the shrinking demand.
1. Decline in demand and serious reduction in corporate orders
Judging from the situation of corporate orders, the overall situation is due to the lack of autumn orders.�Coupled with the impact of the decline in global demand, orders have been severely reduced. The number of enterprise orders increased by 1.69%, a month-on-month decrease of 6.78%; the number of enterprises with orders remained unchanged, accounting for 30.51%, a month-on-month decrease of 18.64%; the number of enterprises with a decrease in orders accounted for 67.80%, a month-on-month increase of 25.43%.
2. Downstream on-demand procurement is mostly on the sidelines and orders continue to be scarce.
Judging from the order arranging period of enterprises, most downstream companies are buying as they go, reading more and saving less. Therefore, the lack of enterprise orders shows no obvious signs of improvement. There is still no enterprise arranging orders until October, and the order arranging period is in mid-August. Companies with ordering periods in the first ten days accounted for 58%, the same as the previous month; companies with ordering periods in mid-to-late August accounted for 32%, a month-on-month increase of 8%; companies with ordering periods in September accounted for 10%, a month-on-month decrease of 9%.
Based on the above factors, it can be predicted that this year’s Golden Nine and Silver Ten may no longer exist.
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