Price Trend

According to the data monitored by business associations, the PC market continued to be weak in mid-May. As of May 16, domestic producers and traders offered an average price of about 18,900 yuan/ton for Bayer 2805.

II. Cause Analysis

Since this month, the upstream trend of bisphenol A in PC has been weaker. Businessmen are not confident enough, trading resistance is greater, intermediaries cut prices and take orders, prices are running at a low level. Downstream factories just need to purchase, demand has not improved. The on-site wait-and-see atmosphere is strong, the expectation of the future market may be poor, and the cost support for the domestic PC market is not good. The operating rate of PC devices in China is general, but the stock pressure increases in the traditional overhaul peak season, and the main theme of the contradiction between supply and demand remains unchanged. Businessmen’s psychology is generally bearish, and the unstable external news aggravates the negative market mentality. Downstream demand has not improved, PC offer is weak and deadlocked.

3. Future Market Forecast

PC analysts of business associations believe that the contradiction between supply and demand in the domestic PC market is prominent in mid-May, and the turnover is weak. External news turmoil intensified and offer was weak and deadlocked. It is expected that the recent trend is likely to be weak and difficult to change.

On May 14, the PX commodity index was 60.00, unchanged from yesterday, down 41.41% from the peak of 102.40 points in the cycle (2013-02-28), and up 31.72% from the low of 45.55 points on February 15, 2016. (Note: Period refers to 2013-02-01 to date).

On the 15th, the domestic market price trend of p-xylene was temporarily stable. Pengzhou Petrochemical Plant was running steadily. Urumqi Petrochemical Plant started 50% of its operation. Fuhaichuang Aromatic Hydrocarbon Plant started one line. CNOOC Huizhou Refinery and Chemical Plant was overhauled. Hengli Petrochemical PX Plant was put into operation. Other units were running steadily temporarily. Due to the normal supply of p-xylene in the domestic market, the market of p-xylene was under normal operation. Price trend is stable for the time being. The opening rate of PX plant in Asia is about 80%. On May 14, the market price of p-xylene in Asia dropped by 29 US dollars/ton. The closing price is 845-847 US dollars/ton FOB in Korea and 864-866 US dollars/ton CFR in China. More than 50% of the domestic units need to be imported. The low price of foreign units has a negative impact on the domestic market price of p-xylene. The price trend of p-xylene in the market is temporarily stable.

On May 14, the price of WTI crude oil in June rose to $61.78 per barrel, an increase of $0.74. The price of Brent crude oil in July rose to $71.24 per barrel, an increase of $1.01. The rising trend of crude oil price has a cost supporting effect on the price of downstream petrochemical products, while the price trend of paraxylene market is temporarily stable. Recently, the textile industry has stabilized temporarily, PTA price declined on the 15th day. The average price of East China is raised near 6550-6650 yuan/ton. As of the 14th day, the domestic PTA start-up rate is about 80%, the polyester industry start-up rate is about 90%, and the downstream production and sales rate remains high. However, PTA market price has not changed much, and the price of PX market is expected to remain volatile in the later period.

On Monday, as the Sino-US trade war intensified, China responded with copper prices falling to a 15-week low. In afternoon trading, copper delivered in July hit $2.709 per pound ($5,972 per ton), down 2.4% from Friday’s closing price.

China will impose a 25% tariff on $60 billion in imports from the United States, including diamonds, rubies and emeralds, iron ore, nickel, zinc and titanium. Lithium is exempted and will continue to be subject to a 5% tariff.

Last Friday, the United States imposed tariffs on $200 billion worth of Chinese imports, with nearly 6,000 products currently subject to 25% tariffs, up from 10% before. The United States imports about $540 billion worth of goods from China every year, while China imports $120 billion worth of goods every year.

China imports nearly half of the world’s copper. Until trade disputes begin to affect the prospects of industrial metals, China’s economic growth has been slowing.

Automobile and Electronic Products

China has also imposed higher tariffs on a range of electronic products and household appliances, including television cameras, telecommunications equipment and microwave ovens.

In a report last week, Capital Economics pointed out that some metals are “more vulnerable than others to trade disruptions between the United States and China”. Given that electronics account for about 30% of U.S. imports from China, the price of metals (especially tin) widely used in the electronics industry seems particularly at risk, the research company said.

With the exception of aluminium, prices of basic metals fell across the board on Monday, and lead prices fell to their lowest levels in nearly three years. Equally frustrating is the data showing that China’s car sales fell by nearly 14.6% in April from a year earlier, the 10th consecutive month of year-on-year decline.

Passenger car sales were hit harder, with sales of 1.54 million vehicles last month, down 16.6% year-on-year, the 11th consecutive month of decline. Domestic sales of battery-powered and hybrid vehicles were 91,000, down 17% from March, but up 28.4% from the same period in 2018.

Price Trend

MTBE prices were 5440 yuan/ton this weekend, down 1.09% from the previous week, according to business association data.

II. Market Analysis

Products: Influenced by the decline in gasoline market prices, domestic MTBE prices fell slightly in this cycle.

Industry Chain: This week’s broad fluctuation of international oil prices slightly declined, which affected the trading atmosphere of the gasoline market weakened. This week’s gasoline terminal demand performance was normal. After MTBE’s weakening and the end of the holiday, gasoline shipments remained very light, middlemen’s inventory pressure increased, and MTBE prices entered the downward channel again.

3. Future Market Forecast

Analysts of MTBE products of Business Society Energy Branch believe that optimism about the future price of international crude oil market will be maintained, and the warming weather will drive up the demand for gasoline, which will stimulate the price of MTBE market to a certain extent. MTBE market is expected to pick up next week.

Shale oil exploitation has given the U.S. oil and gas industry a boom in the past few years. However, in the eyes of some market participants, the boom brought about by shale oil may soon come to an end.

Nick Cunningham, columnist of Oil Price, a website that focuses on oil and gas market information in the United States, argues that over-exploitation by oil and gas companies accelerates the cycle of shale oil industry from prosperity to depression. Cunningham said that over the years, oil and gas companies have improved their technology to get more oil and gas. These companies have improved technology in all aspects of mining, but these technologies have pushed the productivity of every drill to its limit. He believes that today’s high production of shale oil has led many people to overlook that this may be an increase in production from the increase in the number of drilling wells, rather than an increase in production per well.

In fact, according to a new report by Post Carbon Institute, the average lateral length of each well has increased by 44% since 2012, by more than 7,000 feet, and by more than 250% in drilling water consumption. Overall, longer horizontal and greater use of water and sand means that the number of wells drilled in 2018 will be 2.6 times the number drilled in 2012, the report said.

In this report, geoscientist J. David Hughes warned that innovations in drilling technology have reduced costs and allowed resources to be extracted from fewer wells, but did not significantly increase the ultimate recoverable resources. Technological improvements will not change the basic characteristics of shale production, they will only accelerate the life cycle of prosperity to depression.

Once, there were enough shale fields in the United States to achieve rapid production growth, but the boom will eventually end. Cunningham observed that in shale oil and gas producing areas, there has been a trend of improvement in drilling technology but diminishing returns. Nowadays, the distance between drilling wells is getting closer and closer, and the drilling wells will interfere with each other, even the total production will be reduced.

In addition, technological improvements have ceiling limitations. Last year, EQT, the major shale gas producer, drilled a mining section of more than 18,000 feet. The company boasts that it will continue to increase its length to 20,000 feet. But EQT soon found that when the mining section exceeded 15,000 feet, it would face difficult problems to solve. The Wall Street Journal earlier this year called EQT a “huge mistake costing hundreds of millions of dollars”.

Ultimately, the steeply declining production rate means that oil and gas companies need a lot of capital expenditure to maintain production. According to Hughes, the industry spent $70 billion on 9,975 wells in 2018, of which $54 billion was for oil drilling, 70% of which was for maintaining existing production and only 30% for increasing production.

Today, oil wells that are easy to exploit and have high production have basically been exploited, and the whole industry has to face the problems of production decline and rising costs. Hughes said: It is wrong to think that shale oil production will always rise with technological improvements. Shale oil production ultimately depends on its reserves and geological conditions.