After falling sharply in recent days, crude oil has rebounded again. Last weekend, the US President’s first trip to the Middle East attracted much attention. Everyone is looking forward to the effect of this oil price reduction. However, on the key issue of “looking for oil” , did not go as everyone expected. Saudi Arabia did not give a clear position on increasing oil production. Affected by the lack of ability to increase production, crude oil prices rebounded strongly, with a four-day increase of 6.8%.
Raw materials fell sharply, but demand for procurement did not heat up.
Figure 1 Comparison of price trends of pure benzene and caprolactam in 2022
The rebound of crude oil drove the external market of pure benzene to strengthen, coupled with the decline in port inventories. Near the end of July, the supporting factors for the internal and external market of pure benzene were strong, and the spot price was able to rise strongly. As of now, the spot price of pure benzene in East China is 9,550 yuan/ton, which is higher than that on July 15. It rose by 525 yuan/ton, or 5.8%. Looking at caprolactam, the spot price runs counter to that of pure benzene. As of now, the spot price of caprolactam liquid in East China is 13,100 yuan/ton, down 550 yuan/ton or 4.0% from July 15. The spot benzene-hexide gap once shrank to less than 4,000 yuan/ton, which is somewhat surprising. During the week, as the Sinopec contract price was lowered by 300 yuan/ton to 14,500 yuan/ton, domestic spinning companies followed suit. However, downstream textile companies, Traders’ inquiry and purchasing intensity did not increase significantly with the decline of raw materials.
Raw materials fell sharply, but demand for procurement did not heat up.
Figure 2 Comparison of the trend of weaving operating rates in Jiangsu and Zhejiang
Terminal demand is the biggest factor dragging down the sluggishness of the nylon industry chain. As can be seen from the above figure, since the second quarter of 2022, weaving operations have been at a low level in recent years, even lower than when the epidemic broke out in 2020. Now that the off-season is obvious, the textile market has become increasingly cold. , market transactions dropped again, cloth merchants were less enthusiastic about stocking up, and gray cloth inventories also climbed to high levels again. In the face of falling prices of upstream textile raw materials, downstream users are not in a high purchasing mood. The reason is that, on the one hand, entering the high temperature season in July, most weaving production bases are willing to stop for a short period of time. It is said that some manufacturers have taken holidays, and the power supply in some areas of the country is relatively unstable. severe. Recently, there have been notices in the textile circle about off-peak production by companies in many places. The production companies involved include many textile, printing and dyeing and chemical fiber companies. While increasing the production costs of manufacturers, the start-up of many textile printing and dyeing factories has been greatly restricted.
On the other hand, for downstream weaving companies, chemical fiber raw materials such as polyester and nylon continue to experience roller coaster prices. Prices fluctuate and are unstable. Procurement needs to be cautious. The end-use textile and clothing demand is sluggish and inventory is high. If raw materials are purchased at a high level, Investment will undoubtedly once again increase the financial burden on enterprises. Facing the nylon industry chain, from cyclohexanone-caprolactam-polymer chips to nylon spinning, the entire industry chain is losing money. Not only are production companies not very motivated, but also in the face of sluggish order demand and high inventory pressure, the desire to purchase raw materials is also low. Down to freezing point.
Figure 3 Comparison chart of production and inventory trends of nylon filament companies
Last year, India and Southeast Asian countries were affected by the epidemic, and textile orders flowed into China in large quantities. Now as the epidemic control in these regions and countries gradually shows results, the textile industry has also begun to recover. It is well known in the industry that a large number of overseas orders are flowing out to Southeast Asia. The misfire of the foreign trade market has also aggravated the hard days of the domestic textile market. As can be seen from the above figure, the inventory of nylon civilian yarn has gradually increased slightly since 2021, and will continue to fluctuate at a high level in 2022.
In July, the average inventory of nylon filament companies began to decline slightly. In particular, mainstream production companies have to go to warehouses for 3-5 days, which will inevitably lead to a substantial loss of profits. Low prices in market promotions have become the norm. The replacement volume has not had an obvious effect of destocking. On the contrary, some manufacturers’ inventories have not decreased but increased. Therefore, the overall inventory fluctuations in the industry are not large. The current inventory for more than one month is still at a high level, much higher than the same period in previous years.
It is expected that the inventory days of finished products in domestic nylon consumer yarn factories will show a “V” shape in the second half of 2022. The inventory high point in the second half of the year will appear in July. At this time, the weaving off-season is obvious, the demand performance is extremely deserted, and corporate inventory levels may remain high. The inventory low is expected to appear in September, which is the traditional peak season, and there are expectations for improvement on the demand side. The recovery in production and sales will drive nylon factories to reduce the pressure on finished product inventory. However, as the peak season leaves and the end of the year approaches, the pressure on finished product inventory of nylon companies will gradually increase.
There are no obvious signs of improvement in the short term. Taken together, the contradiction between supply and demand of nylon filament will still be prominent in the future. If there is no major help from the cost side, silk prices may continue to bottom out. However, the third quarter will normally enter the autumn and winter season orders. Gradually started, downstream weaving consumption may show an increasing trend in August, and the temperature will drop in the fourth quarter. In addition, most of the early winter orders were started in the third quarter, so the demand fell again.
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