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Insight | Time: Jun 29 2020 4:57PM
Comment on recent CPL contract price
 
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(Note: PA6 chip-CPL price difference of nylon 6 chip in the above chart is based on by cash ex-works price of nylon 6 CS chip and by 6 month payment delivered price of CPL.)

From the trend of the past 5 years, if we analyze polymer profit from the price difference, two points could be clearly seen:

1. In the short term, CPL and nylon 6 chip are in obvious opposite positions. From the trend of the past 5 years, PA6 chip-CPL price difference and CPL-benzene price difference are of 95% possibility in opposites.

2. In the long term, the two still share the glory and loss. When the whole industrial chain is developing in a good momentum, both upstream and downstream are benefiting. On the contrary, if overall performance is weak, most sectors are suffering.

Obviously, current situation cannot be described as a good time neither the current external environment nor the internal environment, and even the industry may have been stepping on the edge of the cliff. So the practical significance of the above two conclusions is that most of the time CPL factories will be the largest profit harvester in the competition with downstream. No matter how unfair it looks, it conforms to the historical trends.

This reminds people of the recent strong performance of CPL contract nominations. Based on the steady and high operating rate of polymer plants, CPL manufacturers have become more conscious of supporting prices along with plant maintenance plans. Although the downstream has been complaining, based on an advantageous position in the supply-demand chain, major CPL contract suppliers are still pushing up prices. It is a most practical strategy, unless the downstream begin to reduce restock volume substantially.

This is a typical strategy of Luxi Chemical (a major CPL supplier in North China), to focus on production, sales and inventory, and pay less or no attention on market forecast.

The supplier has the supplier's position, and the downstream can only accept it. In fact, this approach is relatively simple for the downstream to judge the contract price. The focus is on the actual operating data and the tension of delivery. This is also the reason why we have recently repeatedly emphasized the attention to the changes in downstream operating rates.


[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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