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The domestic petrochemical industry is expected to rebound in June with the arrival of the peak season
In May, there were some fluctuations in China's economic recovery after entering a stable period. According to the National Bureau of Statistics, the manufacturing PMI fell back to 48.8 in May 2023, down 0.4 percentage points from April, with raw material inventories being the weak point. The supply and demand in the real estate market in key cities continued to be weak, market activity declined, and the pressure of real estate destocking rose. in April, social financing increased by 272.9 billion yuan year-on-year; new loans for enterprises and residents diverged, with corporate loans increasing by 683.9 billion yuan and resident loans decreasing by 241.1 billion yuan. On the international front, the Fed's interest rate hike and the U.S. debt ceiling issue raised short-term interest rates, which had a big impact on commodity market liquidity, with commodity prices falling back to varying degrees.
From this month, the index value fell to 94.95, down 3.9 percentage points from April 2023, entering the cooler range; down 1.01 percentage points from May 2022, with a rapidly narrowing decline.
Rationalize the short-term dollar liquidity shock
In early May, the Federal Reserve raised interest rates by 25 basis points, raising the federal funds rate ceiling to 5.5%. in mid-to-late May, the delayed agreement on the U.S. debt ceiling caused short-term market bill rates to rise to a high of 6%. The risk of debt default raised short-term market interest rates, and the interest rate on notes due in June once exceeded 6%, creating a large impact on market liquidity in the short term and causing commodity prices, including precious metals, to fall overall. From the preliminary agreement reached by both parties in the U.S. on the debt ceiling issue, there is no real impact on fiscal spending in fiscal years 2023 and 2024. Once the debt ceiling issue is resolved, the U.S. Treasury will need to issue new U.S. debt to replenish its cash account, which will prompt the Fed to revisit its tapering policy to support the Treasury's debt issuance plan. Overall, although the short-term liquidity impact is obvious, but from a medium-term perspective will instead accelerate the Fed's dollar tightening policy shift, in favor of the overall recovery of the commodity market.
Northern Hemisphere hot season is coming, energy prices may bottom out and rebound
Global gas inventories are significantly above seasonal levels due to the impact of the 2022-2023 warm winter, which has led to a significant decline in global gas prices. The European gas TTF (Dutch Exchange Gas), for example, has fallen from a high of €220/MW in August 2022 to less than €30/MW in May 2023. Falling natural gas prices have also driven down the prices of coal, propane and methanol. In terms of seasonal patterns, the northern hemisphere's hot season will soon be upon us: many parts of Asia are already in the hot season, North America will gradually enter the hot season in late June, and European temperatures are significantly above historical levels for the same period. High temperatures will lead to a significant increase in electricity demand, thus boosting energy demand, and the probability of energy prices bottoming out.
Petroleum and chemical industry boom outlook
From the perspective of the boom indicators, the rebound of the petroleum and chemical industry boom index in April and the fall in May is the result of the impact of large fluctuations in cost margins, which is a direct reflection of the rising volatility of international financial conditions in the context of tightening monetary policy in the U.S. dollar. Excluding the impact of the cost side, the petroleum and chemical industry inventory levels continue to improve, production heat continues to rise, new orders received have also improved, and the overall recovery trend is more certain. It is expected that in June, as the impact on cost factors gradually recede, the commodity price recovery will drive the demand for replenishment, the petroleum and chemical industry sentiment index will usher in a rebound.
The petroleum and chemical industry boom index is jointly compiled by China Petroleum and Chemical Industry Federation and Shandong Zhuo Chuang Information Co. It consists of four sub-indices: "Oil and Gas Extraction Industry Prosperity Index", "Fuel Processing Industry Prosperity Index", "Chemical Raw Materials and Chemical Products Manufacturing Industry Prosperity Index", and "Rubber, Plastic and Other Polymer Products Manufacturing Industry Prosperity Index". The prosperity index of petroleum and chemical industry is selected to measure the potential output and economic efficiency of the industry, including production micro data and industry efficiency data, production micro data include: capacity utilization, product profitability, finished goods inventory level. The basic data comes from the results of regular research and evaluation established with more than 1,000 enterprises.
From this month, the index value fell to 94.95, down 3.9 percentage points from April 2023, entering the cooler range; down 1.01 percentage points from May 2022, with a rapidly narrowing decline.
Rationalize the short-term dollar liquidity shock
In early May, the Federal Reserve raised interest rates by 25 basis points, raising the federal funds rate ceiling to 5.5%. in mid-to-late May, the delayed agreement on the U.S. debt ceiling caused short-term market bill rates to rise to a high of 6%. The risk of debt default raised short-term market interest rates, and the interest rate on notes due in June once exceeded 6%, creating a large impact on market liquidity in the short term and causing commodity prices, including precious metals, to fall overall. From the preliminary agreement reached by both parties in the U.S. on the debt ceiling issue, there is no real impact on fiscal spending in fiscal years 2023 and 2024. Once the debt ceiling issue is resolved, the U.S. Treasury will need to issue new U.S. debt to replenish its cash account, which will prompt the Fed to revisit its tapering policy to support the Treasury's debt issuance plan. Overall, although the short-term liquidity impact is obvious, but from a medium-term perspective will instead accelerate the Fed's dollar tightening policy shift, in favor of the overall recovery of the commodity market.
Northern Hemisphere hot season is coming, energy prices may bottom out and rebound
Global gas inventories are significantly above seasonal levels due to the impact of the 2022-2023 warm winter, which has led to a significant decline in global gas prices. The European gas TTF (Dutch Exchange Gas), for example, has fallen from a high of €220/MW in August 2022 to less than €30/MW in May 2023. Falling natural gas prices have also driven down the prices of coal, propane and methanol. In terms of seasonal patterns, the northern hemisphere's hot season will soon be upon us: many parts of Asia are already in the hot season, North America will gradually enter the hot season in late June, and European temperatures are significantly above historical levels for the same period. High temperatures will lead to a significant increase in electricity demand, thus boosting energy demand, and the probability of energy prices bottoming out.
Petroleum and chemical industry boom outlook
From the perspective of the boom indicators, the rebound of the petroleum and chemical industry boom index in April and the fall in May is the result of the impact of large fluctuations in cost margins, which is a direct reflection of the rising volatility of international financial conditions in the context of tightening monetary policy in the U.S. dollar. Excluding the impact of the cost side, the petroleum and chemical industry inventory levels continue to improve, production heat continues to rise, new orders received have also improved, and the overall recovery trend is more certain. It is expected that in June, as the impact on cost factors gradually recede, the commodity price recovery will drive the demand for replenishment, the petroleum and chemical industry sentiment index will usher in a rebound.
The petroleum and chemical industry boom index is jointly compiled by China Petroleum and Chemical Industry Federation and Shandong Zhuo Chuang Information Co. It consists of four sub-indices: "Oil and Gas Extraction Industry Prosperity Index", "Fuel Processing Industry Prosperity Index", "Chemical Raw Materials and Chemical Products Manufacturing Industry Prosperity Index", and "Rubber, Plastic and Other Polymer Products Manufacturing Industry Prosperity Index". The prosperity index of petroleum and chemical industry is selected to measure the potential output and economic efficiency of the industry, including production micro data and industry efficiency data, production micro data include: capacity utilization, product profitability, finished goods inventory level. The basic data comes from the results of regular research and evaluation established with more than 1,000 enterprises.
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