The domestic futures market is currently exhibiting a distinctly fragmented landscape, with trading data from the early hours of December 16 revealing a significant price drop across various industrial commodity futuresAmong these, glass futures have experienced a decline exceeding 4%, while soda ash futures have nearly dropped by 3%. Other commodities, including caustic soda, urea, coking coal, and Shanghai nickel, have also seen decreases surpassing 2%. Conversely, energy and certain agricultural commodity futures are showcasing a more resilient performance, with SC crude oil, low-sulfur fuel oil (LU), palm oil, alumina, and fuel oil all recording an increase of over 1%.
The steep decline in glass and soda ash futures can primarily be attributed to a dual impact of inventory pressure and weak demandCurrently, the inventory levels within the construction glass industry are relatively high, and the onset of the traditional off-peak season has further driven down market demand
In an attempt to alleviate inventory pressure, some manufacturing companies have resorted to maintenance and production cutbacks; however, the effects have been rather limited, leading the market sentiment to remain pessimisticThe downturn in soda ash futures is closely tied to the subdued demand from downstream glass producersDespite a recent rise in production halts due to maintenance, the overall trend of capacity release remains unchanged, providing weak support for soda ash prices.
The declines in coking coal and urea futures reflect the suppressive effect of relaxed supply on pricesThe downward movement in the coking coal market is primarily influenced by production limitations imposed by steel manufacturers and a slowdown in the winter storage replenishment paceThe urea market, on the other hand, is weakened by declining agricultural demand and increasing pressure from fertilizer exports
Although certain areas in the international market still maintain a demand for urea, the domestic supply-demand imbalance has significantly weighed down prices.
Shanghai nickel futures have also exhibited a clear downward trend in prices against the backdrop of a weakening international nickel marketFrom a macroeconomic standpoint, the downgrading of global economic growth expectations casts a shadow over the entire commodities marketWith major economies grappling with various internal and external challenges, the pace of economic growth is slowing, which concurrently hampers industrial production activitiesIn this context, nickel, being a critical industrial metal, faces tremendous pressure on its demand sideParticularly, in the stainless steel sector—one of nickel’s main consumption arenas—demand has dwindled due to a slowdown in the construction and manufacturing industries
This reduction in demand has led to an imbalance in the nickel market, where supply exceeds demand, resulting in continuous downward pressure on nickel prices.
Simultaneously, the Indonesian nickel ore export ban, which had triggered significant market uproar, is gradually losing its dynamism over timeIn the early days of the export ban, there was intense concern regarding tight supply, which initially fueled a spike in nickel pricesHowever, as the market began to adapt to these policy changes, along with adjustments and countermeasures in the related industrial chain, the actual scenario regarding supply did not become as strained as initially expectedThe supply channels for nickel ore have been somewhat fortified through domestic resource development, supplementary resources from other countries, and inventory reallocations, which alleviated market concerns over tight supply, contributing to the decline in Shanghai nickel futures.
Contrasting sharply with the weak trend in Shanghai nickel futures, energy commodities have recently displayed vigorous rebounds in market performance
Taking SC crude oil futures as an example, the leading upward trajectory in prices is largely attributed to a confluence of factorsOn the supply side, the rigorous implementation of production cuts by major oil-producing countries has been pivotal in driving oil prices higherBy coordinating unified reduction actions, oil-producing nations have effectively controlled the global crude oil supply, gradually skewing market supply-demand dynamics in favor of sellersThis tightening of supply establishes a solid foundation for rising oil pricesOn the demand side, as the global economic landscape stabilizes and certain regions exhibit signs of economic recovery, market expectations towards crude oil demand have improved significantlyThe gradual revival in industrial production, the recovery in the transportation industry, and the normalization of consumer spending all bode well for an increase in crude oil consumption
These advantageous shifts on both the supply and demand fronts collectively push SC crude oil futures prices upward, enabling it to stand out as a leading force among energy commodities.
The increase in low-sulfur fuel oil (LU) futures is closely linked to the seasonal demand rebound in the shipping industry and adjustments in refinery operating ratesThe shipping industry, one of the main consumers of low-sulfur fuel oil, exhibits distinctly seasonal demandDuring certain seasons, such as winter when heating needs rise, and the peaks of international trade transport, shipping activities significantly increase, leading to a substantial uptick in demand for low-sulfur fuel oilRecently, as the shipping market enters its peak season, there has been a surge in ship orders and an increase in travel distances, which directly enhances the consumption of low-sulfur fuel oil and, in turn, supports price growth
At the same time, the adjustments in refinery operating rates also influence the supply of low-sulfur fuel oilRefineries adapt their operational rates based on market demand, crude oil prices, and their production schedulesWhen refining activity levels increase, the volume of low-sulfur fuel oil produced rises accordingly; however, if demand surges faster than supply increases, it can still lead to demand-supply tension and push prices higherConversely, if refinery operating rates decrease and supply contracts, yet demand remains steady or grows, it also supports price stability.
The rise in palm oil futures is primarily bolstered by adverse weather conditions in producing regions coupled with fluctuations in the Malaysian ringgit exchange rateThe weather conditions in major palm oil producing areas have a critical impact on the yield of palm fruits
If these regions experience severe weather events such as droughts, flooding, or typhoons, the cultivation, harvesting, and transport of palm fruits can be hampered, leading to decreased palm oil outputRecent forecasts indicate that certain palm oil production areas are facing unfavorable weather conditions detrimental to palm fruit growth, which has heightened market expectation for a supply shortage in palm oil, becoming one of the key driving factors for the surge in palm oil futuresAdditionally, fluctuations in the ringgit exchange rate also indirectly affect palm oil futures pricesAs one of the world’s major palm oil producers, Malaysia’s palm oil export competitiveness is influenced by the changes in the ringgit’s valueWhen the ringgit depreciates, the price of palm oil, when denominated in U.Sdollars, declines, enhancing the competitiveness of Malaysian palm oil in the international market and stimulating export demand, subsequently pushing up palm oil futures prices.
It appears that the differentiated pattern established in the futures market may persist
Post Comment