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Oil prices plummet, chemical fiber industry faces crisis and opportunities​



On March 6, the OPEC+ meeting ended. OPEC and Russia and other oil-producing countries did not reach a new agreement on production reduction. The previous production reduction agreement will expire at the end o…

On March 6, the OPEC+ meeting ended. OPEC and Russia and other oil-producing countries did not reach a new agreement on production reduction. The previous production reduction agreement will expire at the end of March. Starting from April, OPEC+ countries will be able to increase crude oil production again without being bound by the previous production reduction agreement. As soon as the news came out, WTI and Brent oil prices fell sharply. Finally, on March 6, both oil prices closed with a plunge of nearly 10%, a decline that is rare in history.

On March 7, Saudi Arabia significantly reduced the price of crude oil sold to markets such as Europe, the Far East and the United States, with the largest discount in more than 20 years.

In the early hours of Monday morning, U.S. and Brent crude oil opened sharply lower, with Brent crude oil falling 31% and WTI crude oil falling more than 27%.

The market generally believes that after Russia refused to cut production at the OPEC+ policy meeting on March 6, OPEC (Organization of the Petroleum Exporting Countries) main country Saudi Arabia took the initiative to start a crude oil price war. Against the background of the decline in global demand caused by the COVID-19 epidemic, the scope of the “war” among the major oil-producing countries may further expand, and in the future there may be a tragic “three-country killing” between the three major oil-producing countries: Saudi Arabia, Russia, and the United States.

Affected by the epidemic, the chemical fiber industry has After the resumption of work was delayed, the production and sales of the industrial chain were weak. By the end of February and early March, the terminal operation rate rose to 50-60%, and the operating rate of the chemical fiber industry also gradually recovered. However, just when the market expected supply and demand to improve, the rapid plunge in international oil prices brought a considerable impact to the industry.

In the short term, the plummeting oil prices will have a relatively large impact on chemical fiber companies. First of all, it has aggravated the bearish mentality of the market. Today, PTA futures fell to the limit, and the spot quotations of major chemical fiber products have been significantly reduced. The wait-and-see atmosphere of downstream textile companies has become stronger, and the chemical fiber market is still likely to decline in the short term. Secondly, the drop in crude oil prices has caused chemical fiber companies to suffer heavy losses in raw materials and product inventories. Especially from January to March, due to the dual impact of the Spring Festival and the epidemic, corporate inventories were at high levels and the floating inventory losses were large. But from another perspective, a cliff-like drop in oil prices, that is, a direct drop to the lowest level in one or two days, is more beneficial to the chemical fiber market than a negative drop. The current oil price has fallen below the 2008 low and is approaching the 2016 low. Things must go back to the extreme. A short-term plunge also means that it is closer to the bottom. As the epidemic eases and oil prices rebound, companies’ inventory losses will turn into inventory gains. In addition, the current pattern of the chemical fiber industry is different from that of the 2008 financial crisis. The concentration of the industry has increased significantly in recent years, and it has a certain degree of resilience. Chemical fiber products may not maintain a decline that keeps pace with oil prices.

In the long run, the collapse in crude oil prices will do more good than harm to the chemical fiber industry. First, the cost of raw materials in the chemical fiber industry will drop significantly, and cost reduction will help stimulate demand growth. Second, the overlapping of risks in the short term will accelerate the integration of the survival of the fittest in the industry and further promote supply-side structural reform. Therefore, with the current plunge in oil prices, companies in the chemical fiber industry do not need to panic. Instead, they must see opportunities in crises. How to seize the opportunities after this plunge is the top priority. Although volatility carries risks, it will definitely generate value as long as it remains standing. </p

This article is from the Internet, does not represent Composite Fabric,bonded Fabric,Lamination Fabric position, reproduced please specify the source.https://www.tradetextile.com/archives/37191

Author: clsrich

 
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