The domestic aniline market is about to bottom out and stabilize

The domestic aniline market is about to bottom out and stabilize

Since October, the domestic aniline market has continued the downward trend that began in July, oscillating and seeking a bottom. As of November 27th, the mainstream transaction price in China has fallen to around 8000 yuan (ton price, the same below), and the low-end price has fallen to 7800-7900 yuan, a deep drop of more than 11% in two months, hitting a new low in four years. The scope of corporate losses continues to expand, causing many companies to shut down or partially shut down, and some companies even plan to shut down and switch production. From the front line of the market, it is understood that due to the recent stabilization of pure benzene raw materials, the reduction of enterprise load to its limit, and the expected reversal of downstream procurement situation, as well as the promotion of favorable interest rate reduction policies, the future market of aniline will usher in an opportunity to bottom out and stabilize.

According to industry insiders' analysis, the significant decline in this round of market is not only due to weak downstream demand and pressure from upstream raw materials, but also affected by abnormal downstream production cuts caused by domestic environmental governance and weak macroeconomic conditions, which cannot fully reflect the development laws of the market. It is reported that due to the current loss in sales, enterprises in various regions have become more reluctant to sell, and have begun to implement a strategy of reducing burdens and ensuring prices to cope with the current predicament. There will be the following favorable factors in the future market:

According to market feedback, as of November 27th, the domestic trading price of pure benzene (mainly referring to petroleum benzene) with abundant flow was between 7000 and 7100 yuan, showing signs of stabilization. Most intermediaries and downstream manufacturers are concerned that their existing inventory is at a low level, and if there is a market reversal, it will lead to a failure to replenish inventory. According to industry insiders' analysis, the rapid rebound of petroleum benzene is unlikely due to the current large price difference between gas benzene and petroleum benzene (700-900 yuan), but the space for another deep decline is limited, and the trend of oscillation and stabilization will become mainstream. Therefore, in the current context of generally low inventory of pure benzene in aniline enterprises, once pure benzene stops falling and rebounds, it will form a basic support for the aniline market closely related to the trend of pure benzene, and the possibility of rising cannot be ruled out.

The reversal of the procurement situation has led to demand support. It is understood that aniline has fallen to its current price, and it is no longer cost-effective for enterprises such as Shandong Yantai Wanhua that produce MDI to produce their own aniline equipment. After the maintenance period in November, these enterprises are expected to make a large number of external purchases and inventory, which will inevitably form a procurement highlight and inject recovery momentum into the aniline market under low load and low price. In addition, the abnormal parking caused by environmental protection facility renovation in downstream enterprises across the country in November will also come to an end. Terminal demand still exists, and enterprises such as dyes, additives, pharmaceuticals, pesticides, etc. will also start production one after another, restoring normal procurement volume. Meanwhile, downstream reactive dyes of aniline are still in a period of recovery and growth, as well as a slight increase in exports, providing favorable demand support for the current sluggish market.

According to incomplete statistics, the comprehensive operating rate of domestic aniline enterprises has dropped to a four-year low, maintaining around 30%, reaching the low limit of production load. According to multiple aniline companies in Hebei and Jiangsu, based on the current sales price of 8000 yuan and combined with the price of pure benzene, the company has entered a comprehensive loss. Aniline sales enterprises without downstream supporting products are facing significant cost pressure, which is also one of the reasons why some enterprises plan to stop production and switch to other industries. Multiple manufacturing companies have stated that from a cost accounting perspective, the operating rate of each unit has dropped below 40%, and the possibility of profitability for the company is already very small. Therefore, based on the current situation of enterprise operation, there is not much room for market prices to decline again. According to relevant data, the price drop of aniline in the past three months has exceeded that of pure benzene by more than 5%, and the significant decrease in enterprise load caused by the advanced deep decline has also provided support for the market.

-The interest rate cut is beneficial for the commodity market. In addition, the People's Bank of China suddenly announced a rate cut on November 21, which is beneficial for the commodity market. The announcement stated that starting from November 22, the benchmark interest rate for one-year deposits of financial institutions will be lowered by 0.25 percentage points to 2.75%, and the benchmark interest rate for one-year loans will be lowered by 0.4 percentage points to 5.6%. This is the first time since July 2012 that the central bank has cut interest rates, triggering an increase in commodity and currency prices. The central bank also stated that China has basically met the basic conditions to further advance the market-oriented reform of interest rates. China will continue to promote the marketization of deposit interest rates in an orderly manner by issuing large denomination certificates of deposit to enterprises and individuals in a timely manner. Market analysts have pointed out that the introduction of financial easing and investment incentive policies this time will be beneficial for corporate financing and expanding commodity exports. The introduction of policies is another fundamental benefit for stabilizing the overall market of aniline, and the industry is expected to usher in a new opportunity for bottoming out and stabilizing.