Third quarter China's petrochemical products are expected to make up the inventory cycle

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In the second quarter of the petrochemical industry, under the influence of weak demand and plummeting oil prices, product prices fell sharply and profitability also deteriorated correspondingly. Looking into the third quarter, if the oil price can gradually stabilize and stabilize, the industry is expected to bottom out.

After experiencing price declines in the past six months, the profitability of major petrochemical products has dropped significantly. Taking the most bulky ethylene and propylene as an example, the price difference between it and naphtha is now at the lowest point in the past two years. Statistics show that high-cost ethylene in Northeast Asia, including China, has already fallen into a state of cash loss. The decline in the profitability of basic petrochemical raw materials has led companies in the industry to reduce their load in order to reduce losses.

“Our statistics show that in the third quarter of Northeast Asia, the petrochemical production capacity will be overhauled and the effective supply will be significantly reduced. Taking the most basic ethylene and propylene as an example, the accumulated maintenance/discontinued production of ethylene in the third quarter will reach 43.7%, and the total production shutdown will be 1.668 million tons. The quarter will increase by 10.2%, with an average monthly reduction of 3.4%, while propylene will stop production for 1.154 million tons in the third quarter, an increase of 54,000 tons from the second quarter, while the shutdown of ethylene and propylene will inevitably result in the same proportion of downstream petrochemical species. Production is cut, so the supply of petrochemicals will be significantly reduced in the third quarter."

In terms of demand, the third quarter itself is the traditional peak demand for petrochemical products, and demand will generally be stronger than the second quarter. Zhao Chen said that concerns about the economy of the market led to excessive adjustments in petrochemical production in the first half of this year. With the stabilization of oil prices in the third quarter, demand growth is expected to return to a medium to long-term reasonable level.

Since this year, due to poor demand, downstream companies have generally postponed purchases and consumed as much inventory as possible to maintain production. Zhao Chen believes that the third quarter petrochemical restocking cycle is expected to start. “The fundamental reason for suppressing this year’s production growth is the destocking cycle when the economy goes down, especially since the oil price plummeted in April, which has exacerbated this trend. Take ethylene as an example. As of June 2012, domestic polyethylene was in Shanghai. The inventory of the three ports in Huangpu, Huangpu and Tianjin dropped to 260,000 tons, 40% lower than the highest inventory of 430,000 tons in the past two years and 34% in the same period in 2011. It was the lowest level in the past two years, and recently the price of oil The low level is stable, and the major petrochemical products are expected to make up the inventory cycle under the support of supply and demand. This will also significantly increase demand, which in turn will drive up prices."

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