Recently, ethylene glycol futures have been active. Since the basis of the 1-5 contract rose to a high of 442 yuan/ton on September 17, This started a situation of endless decline. On November 7, the lowest level reached a flat level, and then it began to rebound. After entering December, the basis showed another surge, reaching a maximum of 276 yuan/ton. It fell back quickly.
The dramatic fluctuations in the basis reflect the nature of the current ethylene glycol market trend. On the one hand, the supply side has continued to be positive recently, including the continued reduction of inventories in main ports. The operating load of glycol plants has always been low, which has led to the market’s optimism about ethylene glycol in recent months. On the other hand, the expected increase in new production capacity next year has intensified the market’s concerns about the supply side of goods in far months. Whether it is bullish logic or The short logic has fallen into contradictions, causing the ethylene glycol market to enter a sideways consolidation range since mid-October. In the absence of obvious market opportunities, transactions with 1-5 correct operating ideas are Businessmen began to increase. They waited for an excellent entry opportunity in early November, because the 1-5 basis dropped to a flat state, and the fundamentals in November had obvious positive support for the 1-5 set. The Yangtze River Due to weather closures, nearly 40,000 tons of spot goods being contaminated, and other factors, the supply side is very tight. The 1-5 basis has naturally increased, but the 1-5 set requires two-way funds and arbitrage. The risk is controllable and the position can be increased. While the basis is strengthening rapidly, a large number of profit orders have also been accumulated. Since this position has a large position and the profit is quite generous, in this context, if these profit orders Escape will cause the basis to fall rapidly from the high level. Last night, the 1-5 basis showed a sharp retreat trend. The 01 contract fell sharply, and the 05 contract did not rise or fall but rose. Therefore, when doing basis trading, once When you find a U-turn in the basis, you should leave the market decisively, because profit taking will escape much faster than a unilateral contract.
On the other hand, the activeness of the 1-5 basis also reflects that there will be a lot of stories between the 1-5 contracts. The first is the impact of whether new production capacity can be added as scheduled. The market is full of variables. At the beginning of 2019, the market generally believed that this year would be a good year for production and supply would increase significantly. The real result was that most devices did not come into production as scheduled, resulting in inventory at the end of the year being lower than the same period last year. Therefore, expectations were met. If reality falls short of expectations, the market will react violently. Even if it can be put into production as scheduled, it depends on the fundamentals at the time, such as the impact of cost factors. At present, most ethylene glycol factories are in a state of loss. If costs do not fall, the market will have greater room for decline. It is intolerable to most ethylene glycols.
In summary, ethylene glycol will be highly variable in the first half of 2020, and it is expected that there will be a fierce long-short game. Therefore, it is not appropriate to be blindly pessimistic when the current price is relatively low. Bulls suffered heavy losses in 2019, but the tide is turning, and perhaps bulls will usher in a long-lost spring in 2020.
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