As the overnight OPEC+ special meeting brought rounds of “scares” to the market, international oil prices experienced a transition from a 10% surge to a 10% plunge.
(The crude oil market is affected by The news fluctuated significantly, source: Financial Associated Press, TradingView)
After seven hours of negotiations, OPEC+ finally confirmed a production reduction agreement that was lower than market expectations. OPEC+ will reduce production by 10 million barrels per day from May 1, 2020, for two months; from July, it will reduce production by 8 million barrels per day until the end of this year; from January 2021, it will reduce production by 6 million barrels per day until 2022. April 22nd.
OPEC+ production cuts are less than expected, causing oil prices to fall after a surge
Oil-producing countries led by Saudi Arabia and Russia try to finalize a production reduction agreement, and global fuel demand drops by 30% to solve the increasingly serious oversupply problem. However, analysts said OPEC+’s final production cuts may be smaller than market expectations, adding that the demand destruction caused by the pandemic-induced recession is too great to solve easily.
Various investment banks and research institutions generally believe that cutting production by 10 million barrels per day will obviously not change the imbalance between crude oil supply and demand.
Sandy Fielden, director of commodity research at Morningstar Inc, said that what happened tonight was as usual – the production reduction plan was well discussed, but the implementation details and the shares of each country are the real key. What’s more, the role of the G20 (Meeting of Energy Ministers) is still a mystery.
Wells Fargo energy analyst Roger Read pointed out that until social distancing measures are implemented in parts of North America, Europe and Asia, OPEC’s production reduction measures will at best be able to barely keep up with falling demand.
Baird analyst Ethan Bellamy believes that a production cut of 10 million barrels per day is simply not enough to balance the market…. For OPEC, the only trick that can be used is to use prices (falling) to force other high-end countries such as the United States to Cost countries cut production. Considering that Russia currently has more than 500 billion US dollars in foreign reserves, it does have the capital to engage in price wars to snatch customers from American oil producers.
OPEC and its allies including Russia, known as the OPEC+ group, had proposed cutting production by 15 million -20 million barrels per day, equivalent to 15%-20% of global supply.
However, Iran’s Oil Minister stated that only a production reduction of 10 million barrels per day will be implemented in May and June 2020. Production will be reduced by 8 million barrels per day from July 2020 to the end of the year, and by 6 million barrels per day starting in January 2021.
John Kilduff, a partner at hedge fund company Again Capital LLC, said that the production reduction figures they proposed cannot complete the task, and the market has digested large production reduction expectations in the past few days. Oil-producing countries need to remove mountains, and they may only move a small slope of dirt.
A daily production cut of 10 million barrels will be the largest production cut since the establishment of OPEC, but Russia insists that it will only reduce production if the United States joins the agreement. Other large oil producers, such as Canada and Brazil, have expressed support for production cuts, but they are currently cutting output due to market forces.
The United States has not yet said whether it will implement mandatory production cuts. On the contrary, the United States said that market forces have caused oil companies to start reducing production, and it is expected that by next year, U.S. production will decrease by nearly 2 million barrels per day.
With the conclusion of a new round of production reduction agreement, what kind of development will the polyester market usher in?
With both domestic and foreign trade blocked, weaving companies have been under tremendous pressure.
In terms of gray fabric inventory, the current gray fabric weaving inventory in Shengze area is about 41-42 days. Market orders have not improved and there will continue to be an upward trend in the future.
Under the huge pressure of gray fabric inventory, reducing production has become the choice of most weaving companies. In current weaving enterprises, second shifts are no longer common, replaced by third and fourth shifts. As time goes by, if the order situation still does not improve, the suspension of production is already in the company’s plan.
It can also be seen from the production capacity of weaving enterprises that according to the data monitoring of China Silk City Network, after late March, the loom operating rate of weaving enterprises in Jiangsu and Zhejiang did not increase but fell, falling to 72 on April 3 %, while the opening rate in the same period last year was close to 90%.
As the operating rate of weaving companies continues to decline, it is unknown how much money weaving companies can spend to purchase raw materials.
Beginning on April 2, as crude oil prices rebounded from lows and polyester raw materials rose, polyester production and sales experienced a rare “three consecutive positives”. In this wave of market conditions, some of the buyers of raw materials are well-run companies, some are companies with more radical strategies, and some are raw material traders.�. However, for some companies with more conservative business strategies, they have not actually carried out large-scale replenishment, and still maintain the original buy-and-use strategy.
If the price of polyester raw materials rises in the future driven by crude oil, although it may drive some weaving companies to purchase raw materials in a short period of time, causing a peak in production and sales, in the long run, this trend is very It is difficult to continue for a long time.
On the one hand, many weaving companies that are willing to replenish their stocks have done so during the round of rising polyester prices that started on April 2. Those that have not replenished their stocks are mostly companies with more conservative business strategies. ; On the other hand, when domestic and foreign trade have been greatly affected and future orders have not yet been secured, weaving companies’ enthusiasm for buying raw materials will also be affected.
The Butterfly Effect of the Global Textile and Apparel Supply Chain: Spring and Summer Textile and Apparel Death in the First Half of the Year
In mid-March 2020, Adidas announced that it would temporarily Close Adidas and Reebok stores in Europe and North America. European stores were closed on March 18, and stores in the United States and Canada were closed on March 17.
Another sports giant, Nike, also announced on March 15 that it would close all offline retail stores in the United States. Nike’s retail stores in Canada, Western Europe, Australia and New Zealand will be closed starting from March 16, local time.
The continued spread of overseas epidemics is another serious impact on Chinese clothing and textile foreign trade companies. According to the third survey of the China National Garment Association, 46% of the companies surveyed reported that while domestic orders have dropped significantly, export orders have also faced declines or cancellations, and logistics has been hindered and the pressure is huge.
“I am very anxious and have not slept peacefully for a day in three months. The epidemic in China was severe in January and February. The factory is unable to produce, and overseas customers are pressing for orders, which makes me panic. Now that the epidemic is breaking out in Europe and the United States, customers are no longer pressing, and are starting to cancel orders, and even postpone orders from April to June. I don’t know what will happen next.” A clothing store in Ningbo Mr. Xu, the person in charge of the factory, told reporters.
In the early years, this company mainly provided fabrics for brands such as O&M, VERO MODA, Zara, and H&M. The fabrics it produced were exported to European countries such as the Netherlands and Germany, as well as Dubai. , Australia, etc.
Mr. Xu told reporters that before a piece of clothing reaches consumers, it has actually traveled half of the world. “After Korean and Japanese clothing companies order fabrics from China, they transport them to self-built clothing production plants in Southeast Asia for garment production. Finally, the finished garments are shipped to European and American countries for sale. This is a microcosm of the globalization of the garment industry chain.” Mr. Xu said.
According to WTO data, China has long been the world’s largest textile and clothing exporter, and China’s clothing exports account for more than 35% of the world’s clothing exports.
However, since the outbreak of the new coronavirus, according to statistics from the General Administration of Customs of China, from January to February 2020, my country’s textile and clothing exports were US$29.835 billion, a year-on-year decrease 20%. Among them, the export value of textiles (including textile yarns, fabrics and products) was US$13.773 billion, a year-on-year decrease of 19.9%; the export value of clothing (including clothing and clothing accessories) was US$16.062 billion, a year-on-year decrease of 20%.
We have entered the second quarter in the blink of an eye, and the first impact of the epidemic on products is spring and summer clothing.
According to the usual practice, traders would successively ship orders for spring clothing fabrics before the Spring Festival holiday in previous years, and began to be busy with summer clothing fabrics after resumption of work. However, this year’s epidemic has compressed consumption to the extreme, resulting in The demand for spring and summer clothing has ended as soon as it started. Simulated silk, the mainstream product of spring and summer clothing fabrics on the market, is also in a situation of overcapacity. Several manufacturers of simulated silk fabrics said that there have been very few orders recently, and dyeing factories have put simulated silk into warehouses. The volume is also significantly reduced compared with that after the start of construction. It can be seen that the epidemic has disrupted all original production and sales plans.
An old clothing company in Tianjin told reporters: “The epidemic has hit us hard. The cash flow on the account is negative. In order to be able to survive, some time ago, we Merchants also went to the property management office to ask for rent reductions. At the end of last year, they received several batches of European orders, but they have all been cancelled. Since the resumption of work, they have not received new orders, and there are no customers in the store. Currently, they can only live stream through Taobao The original five partners now only have me and one other partner.”
The negative impact is still brewing, and some autumn and winter orders have begun to be cancelled!
The best period for production was missed in the first half of the year, and it is reasonable for spring and summer fabric orders to be canceled. So, can we speed up the recovery in the second half of the year? Of course, because of the epidemic caused The negative impact is still brewing in the market. In the short term, the market is still plagued by “lack of orders”, and even some orders for autumn and winter fabrics have begun to be cancelled!
Mr. Li, a trader exporting to India, revealed that he had an imitation memory fabric of more than 10,000 meters for export to India. It had been completely completed and he was called urgently when he was preparing to export it. stop. The incident happened on March 20. Mr. Li said that on the morning of the 20th, the customer sent an email to remind him of the order. In the afternoon, he received an email that India would lock down the country nationwide on the 24th and suspend orders. Mr. Li told the editor that this batch of imitation memory fabrics is used to produce winter clothes.
Indian Prime Minister Narendra Modi announced on March 24 that in response to the new coronavirus epidemic, a “city lockdown” will be implemented nationwide starting at midnight that day and lasting for 21 days. . The shipping time from China to India is about 20 days, which is not expected to affect Indian customers’ receipt of goods. However, it is clear that customers also considered the extended shutdown time when suspending orders. Once the resumption of work is delayed, it may not be able to catch up with the new winter clothing, and there is still the possibility of order cancellation in the future.
Overseas epidemics are optimistically estimated to last until June and July, but pessimistic expectations may continue until after August. Nowadays, the cancellation of autumn and winter orders requires textile and clothing bosses to pay attention.
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Indian Prime Minister Narendra Modi announced on March 24 that in response to the new coronavirus epidemic, a “city lockdown” will be implemented nationwide starting at midnight that day and lasting for 21 days. . The shipping time from China to India is about 20 days, which is not expected to affect Indian customers’ receipt of goods. However, it is clear that customers also considered the extended shutdown time when suspending orders. Once the resumption of work is delayed, it may not be able to catch up with the new winter clothing, and there is still the possibility of order cancellation in the future.
Overseas epidemics are optimistically estimated to last until June and July, but pessimistic expectations may continue until after August. Nowadays, the cancellation of autumn and winter orders requires textile and clothing bosses to pay attention. </p
