The coal chemical industry market appears to be in great shape during the \"Golden September\" period, but in reality it faces numerous pressures

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The coal chemical industry market seems promising in September, but in reality it faces significant pressures 2012-10-08 11:14 Source: Steel Union Coal Chemicals Author: Zhao Manman. In September, the prices of most key products in the coal chemical industry rose to varying degrees, yet behind these price increases lay pressures and concerns. By analyzing the reasons behind their price increases, it is easy to see that factors such as limited supply, cost pressures, and rising crude oil prices are the main drivers of these price hikes. However, the traditional peak demand period of \"Golden September\" has not manifested itself, and there have been no sufficient positive developments in the downstream and end-market demand for coal chemical products. In September, the coal chemical industry market saw ten increases and one stable price. According to data from the \"Steel Union Coal Chemicals\" website, as of the 27th, the Mysteel high-temperature coal tar (national standard) index was at 2794 points, representing a cumulative increase of 224 points this month, an increase of 10.57% on a month-on-month basis, and an increase of 5.51% on a year-on-year basis ； The Mysteel crude benzene (national standard) index closed at 7,677 points, rising by 852 points on a monthly basis, an increase of 14.80% on a week-on-week basis, and 24.87% on a year-on-year basis ； The Mysteel methanol (national standard) index closed at 2,612 points, rising by 39 points on a monthly basis, an increase of 3.57% on a week-on-week basis, and 13.22% on a year-on-year basis ； The Mysteel sulfuric acid An (coking national standard) index closed at 908 points, rising by 1 point on a monthly basis, an increase of 0.44% on a week-on-week basis, and falling by 11.90% on a year-on-year basis. As shown in Figure 1 specifically. http://img02.mysteelcdn.com/wz/uploaded/coalchem/2012/10/08/111123.png Figure 1: Price trends of methanol, sulfuric acid AN, crude benzene, and tar in September. Among the eleven products monitored in the coal chemical industry market, the prices of ten products increased; only the sulfuric acid AN market remained relatively stable, with no significant fluctuations in prices in the main production areas. In Shandong province, prices rose at the beginning of the month due to increased demand for compound fertilizers, but they dropped later in the month as purchasing of such fertilizers decreased. Additionally, the increase in methanol prices was relatively small; tight market supply contributed to this rise in methanol prices. (Shutdowns for maintenance are concentrated in the northwestern region, and due to the poor performance of the coke market, most methanol production facilities that use coke gas are still operating at reduced capacity, resulting in relatively significant supply shortages in the North China and northwestern regions.) Table 1 shows the price increases for various products in September. Table 1: Price increases for the top 10 products and the factors contributing to these increases. Unit: yuan/ton. Products: High-temperature coal tar, industrial naphthalene, water reducer, coal tar pitch, carbon black. Price increases: 300–400, 1400–1600, 400–600, 300, 100–300. Factors contributing to increases: Limited supply, rising prices in downstream markets, cost support. Products: Crude benzene, coking benzene, hydrogenated benzene, maleic anhydride, methanol. Price increases: 700–800, 1000–1100, 1000–1100, 1000–1100, 10–200. Factors contributing to increases: Limited supply, rising prices of pure benzene, high prices in downstream markets, limited demand, cost support, maintenance of pure benzene production facilities. The market conditions of “three highs” and the factors that drive them up: In September, the coal chemical industry experienced market conditions characterized by “three highs”. Historical prices reach new highs — the benzene market. The benzene market remained volatile in September, with prices for all products reaching new highs. Among them, the crude benzene market entered the \"8-era\", with a new high of 8,500 yuan per ton, which is more than 1,000 yuan per ton higher than the previous record high ； The market price of hydrogenated benzene has exceeded 10,000, with the price increase even exceeding that of Sinopec’s listed price for pure benzene ； The price of maleic anhydride has reached around 11,700 yuan per ton; this level represents the highest price for maleic anhydride in China in recent years, and it is also close to the historical highest price recorded before the financial crisis in 2008 ； The highest price for coked benzene is 10,200 yuan per ton, a figure that exceeds the highest price recorded in 2008, which was 1,000 yuan per ton. Supported by three major positive factors, products such as crude benzene have managed to set historical records. First, there is a shortage of goods. “The shortage of supply highlights the contradictions between supply and demand across the entire industry chain; as coking companies increase production restrictions, the shortage of crude benzene becomes even more difficult to resolve. With these increased production restrictions in coking plants, manufacturers are more inclined to hold prices high, leading to upward price trends. From the perspective of advanced processing of benzene, manufacturers of hydrogenated benzene and cokerized benzene face a situation where there is insufficient demand; as a result, the operating rates of various companies engaged in the advanced processing of benzene are declining, and market supply is decreasing. (At the same time, rising prices of crude benzene continue to squeeze the profits of manufacturers of cokerized benzene and hydrogenated benzene, which is another factor that limits the operating rates of these facilities.) This shortage of supply contributes to high prices in the benzene processing market. Second is the drive from pure benzene. Any increase in the listed price of pure benzene by Sinopec has an impact on the benzene market, and the four price increases for pure benzene by Sinopec in September pushed the benzene market to new heights once again. In September, the listed price of pure benzene at Sinopec was raised four times, resulting in a cumulative increase of 900 yuan per ton. It is understood that since early July, domestic pure benzene prices have been raised a total of 12 times (the price of pure benzene in the East China region is 9,800 yuan per ton), for a cumulative increase of 2,500 yuan per ton. As a result of this, the prices of crude benzene, hydrogenated benzene, and cokerized benzene rose sharply (since July, the price of crude benzene in China has increased by 2,900 yuan per ton, with pure benzene playing a key role in this increase). Third is the positive external factors in September. In early September, international crude oil prices remained high, providing positive support for the fundamentals of the aromatics market. Driven by the introduction of QE3 in the United States, its price rose to $100 at one point during the trading session, before closing at $99; meanwhile, the two consecutive price increases in refined oil domestically were also finalized this month, contributing to the upward trend in the overall aromatic compounds market. However, as the positive factors ran out toward the end of the month, international crude oil prices continued to fall, dropping back to around $90, which immediately dampened confidence in the benzene market. Rising prices have also made manufacturers face high risks. After three more months of strong price increases, the bullish trend in the benzene market began to fade by the end of September. Back to year-highs: the high-temperature coal tar market. This month, the prices of high-temperature coal tar in most regions including East China, North China, and South China are already at high levels of over 3,000 yuan per ton; in East China, the quoted prices range from 3,050 to 3,100 yuan per ton. The low operating rate of coking enterprises (see Table 2) is undoubtedly a major positive factor for the high-temperature coal tar market, but there are other reasons as well that drive up the prices of high-temperature coal tar. The prices of downstream processed products have risen significantly; in particular, the sharp increase in the price of industrial naphthalene has provided strong support for the high-priced supply of coal tar. As prices of downstream products stopped rising and stabilized in late September, the upward pressure exerted by high-temperature coal tar encountered resistance, and the market gradually settled down; some suppliers are concerned about the future prospects for high-temperature coal tar. Table 2: Production status of coking enterprises in September. Regional production rates and notes: East China – 50%-60%; North China – 40-50%, with a small number of manufacturers having a rate of less than 30%; Northeast China – 50-60%; Central China – 50-70%; Northwest China – 50-60%; Southwest China – 50-60%. The highest increase was seen in the industrial naphthalene market. The price of industrial naphthalene saw a sharp rise in September, climbing from 4,700 yuan per ton to 7,800 yuan per ton; in some areas it even reached 8,100 yuan per ton. The overall increase was 42%. This sharp rise in industrial naphthalene was mainly driven by the continuous increase in the price of raw material, high-temperature coal tar, reduced operation of facilities for the further processing of tar (with an operating rate of around 60% in September), supply constraints, and price hikes by intermediaries. However, the price of industrial naphthalene rises quickly and falls just as sharply. The sharp rise in industrial naphthalene in the first half of September was viewed by many in the market as an irrational increase. This is mainly because the peak demand period of \"Golden September and Silver October\" has not materialized in the downstream naphthalene-based high-efficiency water-reducing agents industry, with demand remaining weak; coupled with insufficient new real estate construction projects, sales volumes have not increased. As the price of domestic industrial naphthalene rises, the sales of such naphthalene in the domestic market face difficulties; the high prices lead to increased resistance from downstream users, which in turn sets the stage for a decline in prices in the future. In the second half of September, the industrial naphthalene market started to decline as downstream demand weakened. At that time, high-temperature coal tar, which is used as a raw material, also showed signs of a slowdown in price increases, marking the end of the sharp rise in the industrial naphthalene market and leading to a more rational market situation. At the end of the month, industrial naphthalene prices across the country saw another decline, with intermediaries selling their stock in large quantities. Although some manufacturers continued to push up prices, the increased supply of this product made it difficult for them to maintain their original pricing, leading to price cuts of 200–300 yuan per ton. Behind this upward trend, there are changes in the mindset of merchants. Although prices of most products in the coal chemical industry rose in September, there was a significant risk: downstream demand failed to keep up. For a market where demand is the key factor, any price increase without sufficient demand support is undoubtedly dangerous. The sharp rise in prices has affected the mindset of merchants. Take Ben City as an example. As the price of crude benzene rose to high levels, there was a noticeable change in the mindset of merchants. Influenced by the market rule that \"after a sharp rise, there must be a sharp fall,\" market participants became more cautious in their trading decisions. Since mid-October, international crude oil prices have continued to fall (dropping below the 90-dollar mark), which has had a negative impact on the attitudes of businesses. A bearish sentiment began to spread in the crude benzene market, and subsequent negative developments followed: Sinopec stopped raising the price of pure benzene, while auctions for benzene produced by Shanxi Datuhe also ended without any buyers. The bidding price for light benzene from Handan Iron and Steel was as low as 7,500–7,600 yuan per ton, which dealt a severe blow to the market and led to a significant decline in the willingness of downstream buyers to purchase this product. Due to the National Day holiday, some businesses have already started to leave the market. The decline in the price of crude benzene at the end of September also undermined the confidence of downstream manufacturers such as those producing coking benzene and hydrogenated benzene to hold prices steady; concerns about the future market increased, leading to a greater tendency to sell their products promptly in order to realize cash. Regarding the future market: A strong performance during the \"Silver October\" period remains unlikely, as the weak macroeconomic environment has resulted in a lack of vitality in the domestic market during this peak season. Judging from the performance of various products in the coal chemical industry at the end of September, the prospects for a good performance during \"Silver October\" are also not optimistic. The upward trend of high-temperature coal tar in October may slow down, with downstream performance still to be seen. At the end of September, the high-temperature coal tar market continued to show an upward trend. In the coking industry, plant shutdowns and production restrictions remain severe, and the tight supply situation in the high-temperature coal tar market persists. Supported by these positive factors, the price of high-temperature coal tar is likely to rise rather than fall. However, from the perspective of the downstream coal tar deep processing and carbon black markets, the rise in prices in September was mainly due to the passing on of costs. In September, prices in various downstream product markets rose to varying degrees, but high-level transactions encountered resistance, resulting in limited price increases; there is now very little room for further rises in the high-temperature coal tar market. It is expected that by October, there will be little room for further price increases in the high-end coal tar market, although there is still a slight possibility of upward adjustments at lower levels. Recently, the upward trend in the domestic real estate market has been curbed, and the initially rising housing prices across various regions have now been brought under control by government measures. After the decline in real estate markets across various regions ceased in the early stage, developers began to acquire land, which may boost the downstream market in the future. During the same period, the Ministry of Land and Resources issued a regulation requiring a fee of 20% of the land value to be paid for unused land. Under the influence of this policy, terminal demand might see some improvement in the second half of the year, with such improvements likely to occur after October; however, it remains to be seen whether the market conditions for industrial naphthalene and water reducers will improve as well. On September 26, the U.S. special tariff measure on Chinese tires expired; the positive impact on carbon black has not yet become apparent, and it remains uncertain whether any benefits will emerge in October. The downward trend for crude benzene has begun, with the benzene market expected to see declines in October. The benzene market saw fierce gains in September, with prices of various products reaching new historical highs; at the same time, risks associated with these high levels were also increasing. After a previous surge in price, the price of crude benzene reached its peak and then started to fall by the end of the month. It is understood that in Shanxi and Hebei provinces, the price has dropped by 200 yuan per ton, and there is a growing pessimism among downstream buyers, who have stopped taking deliveries. In late September, international crude oil prices continued to fall. During the last week of the month, two auctions of crude benzene at the Datu River in Shanxi were unsuccessful; various negative factors affected the crude benzene market, and a downward trend in prices began to emerge, with a high probability of further declines in October. The decline in the price of crude benzene, coupled with poor demand from downstream buyers, has led manufacturers in the benzene processing industry to adopt a cautious attitude, resulting in weak purchasing activity and little optimism regarding future prospects. Methanol’s \"Golden September\" has turned into a fantasy, and a \"Silver October\" is even less likely. Although methanol prices rose in September, the peak demand period that market participants had been expecting, known as the \"Golden September and Silver October,\" did not arrive as scheduled. Currently, the overall operational rate in the downstream sector is low, which does not lead to an increase in methanol purchases; demand remains weak. The main driver of demand for methanol – the formaldehyde industry – is experiencing low operational activity due to fluctuations in the real estate sector (with an overall operating rate of less than 50%) ； Although the utilization rate of dimethyl ether has increased compared to last year, the continuous sharp drop in crude oil prices has led to a decline in liquefied gas prices as well; thus, there are no significant positive factors in the dimethyl ether market ； Although the acetic acid market performed fairly well in September, its support for methanol was limited. However, the startup date of the methanol-to-olefins plant in Ningbo, in the East China region, has not been determined, and the market is awaiting news on this. Sulfuric acid remains weak or continues in this state. The main reason why sulfuric acid remains in a weak market trend is the poor performance of its three key demand sectors. In September, the expected boost from the start of the autumn fertilization season that the market was anticipating did not occur. If there are still no positive developments for the three main factors in October, the price of sulfuric acid AN could decline. With the domestic economy in a weak state and little improvement in the end-market, it was no easy feat for the coal chemical industry to perform well in September. Yet, after all, the market is what it is – supply and demand are what truly matter. Whether the positive performance of the coal chemical industry will continue in October remains to be seen, as sharp fluctuations are not uncommon.