News of the plunge in crude oil has spread wildly in major circles of friends. On July 19, WTI crude oil futures fell below US$70 per barrel for the first time in more than a month. Because OPEC and its allies agreed to increase production while the delta virus threatens global demand. WTI August crude oil settlement price fell 7.5% to $66.42/barrel, the largest one-day percentage drop since September last year and the lowest settlement price since May 28, while Brent crude oil settlement price fell in September 6.8% to US$68.62/barrel.
This is for the textile industry that has continued to rise for nearly a month. In terms of raw materials, this is obviously not good news. After all, one of the main factors supporting the rise in raw material prices is the rise in international oil prices. However, the current international oil prices have not only fallen to US$70/barrel, but have also returned to the price at the end of May. You should know that polyester filament was still undergoing weekly price reductions in May, but the current price has generally increased by about 10% compared to the price of polyester around May 28, and was once close to the highest value of raw materials at the beginning of this year.
How will it end if the price of raw materials increases?
Like the raw material price reduction promotions from April to June, raw materials have continued to rise since the end of June, which has also made our downstream textile companies gradually get used to it. The rising cost of raw materials has made life even worse for textile companies that are already struggling with orders. However, facing the polyester giants, the downstream generally lacks the right to speak, so they can only accept it silently. As usual, on July 19, the raw material factory issued a price increase statement again, planning to raise prices the next day.
But the plan failed to keep up with the changes and the plunge in crude oil prices Instantly broke the chemical fiber factory’s price increase plan. There were only a handful of manufacturers that actually raised prices on July 20. Polyester filament prices were generally stable, with only a few specifications rising slightly, and nylon and spandex showing no increase at all. Major raw material manufacturers have broken their promises. Faced with the plummeting price of upstream crude oil, the reason for raising raw material prices no longer exists. The price increase promised yesterday has become a joke today.
The decline in crude oil has made it unlikely that textile raw materials will rise in recent days. Does that mean that raw material prices will return to price cuts again?
After a short pause, raw materials may still mainly rise
Although the increase in crude oil production has caused crude oil prices to plummet, the market generally believes that the OPEC+ agreement is positive for oil prices, because the greater risk for the market is that Saudi Arabia and the United Arab Emirates will part ways, and OPEC will not be able to maintain it, which will make it even more More production may flood the market quickly.
Oanda analyst Edward Moya said, “The commodity rally is not over yet, but it may pause sharply here. The fundamentals of WTI crude oil still support another sharp rise. It only takes about a month to get rid of the growing risk aversion.” In other words, the weakening of crude oil prices is short-term, and in the long term, crude oil prices will mainly increase.
The main support for the increase in raw material prices in the early stage was crude oil. If the increase in crude oil continues in the future, textile raw materials will inevitably return to the increase. On the other hand, demand has a greater impact on raw material prices. Maybe many textile companies in the market feel that the recent textile market is average and orders have not substantially improved. However, due to the improvement of autumn and winter fabrics, advance stocking, and better expectations for the second half of the year, etc. The reason is that in fact, the weaving end has already begun to bottom out, and the operating rate has rebounded significantly.
It can be clearly seen from the chart that the recent changes in Jiangsu and Zhejiang The start-up rate of various textile clusters has rebounded significantly, and some areas have reached the highest peak this year, even on par with last year’s peak season. Specific analysis shows that the recent weaving start-up rate in Jiangsu and Zhejiang has been adjusted back from the last week of June. This time point is very consistent with the price of raw materials stopping falling and rising. Obviously, not all support for raw material prices comes from raw material prices. The rebound in downstream demand also plays a big role.
Therefore, the recent decline in crude oil prices is not necessarily It can prompt raw material prices to return to the previous price reduction promotions, not to mention that the market expectations for crude oil prices are good, and it is only a matter of time before they return to an upward trend. However, the rising momentum of raw materials will definitely be interrupted in the short term, and downstream weaving may gain some breathing time.
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