Continued Divergence in the Domestic Futures Market: Energy Leads, Industrial Products Under Pressure
On Monday, December 16th, the domestic futures market continued last week's divergent trend with significant differences among various sectors. Energy and some agricultural product prices rose strongly, while industrial products such as glass and soda ash experienced substantial pullbacks, indicating the market is influenced by macroeconomic conditions, basic supply and demand changes, and global market linkages.
Early trading data showed that glass futures fell by more than 4%, soda ash nearly 3%, and industrial products including coking coal, urea, and Shanghai nickel all dropped by over 2%. On the other hand, energy commodities like SC crude oil, low sulfur fuel oil, and palm oil increased by over 1%.
Significant Drops in Glass and Soda Ash: Twin Pressures of Inventory and Demand
Glass futures led the market decline with a drop of over 4%, mainly due to high inventory levels and weak demand. The construction glass industry has entered its traditional off-season, coupled with sluggish market sentiment, making it difficult for prices to find short-term support. Although some production companies have reduced output through maintenance to alleviate inventory pressure, the effects are limited.
In the case of soda ash, weak downstream glass demand directly drags on the upstream. Although some companies have temporarily halted production, the overall supply and demand situation remains loose. In the short term, the price support for soda ash is weak, and further volatility is likely.
Future trends will depend on the recovery of demand in the construction industry, which may require more support from macroeconomic policies targeting infrastructure and real estate.
Coking Coal and Urea: Loose Supply Suppresses Price Rebound
Coking coal futures fell by more than 2% due to refined steel production constraints and a slowdown in winter storage rhythms. Despite some mining companies reducing production, the loose supply-demand pattern is unlikely to change in the short term, keeping prices under pressure.
The urea market weakened with declining agricultural demand and increased export pressure. Although international market demand remains supportive, high domestic inventory levels keep prices under continuous pressure. Future developments will depend on policy support for export orders, but overall price trends remain weak.
Shanghai Nickel Volatility: Global Economic Weakness Drags
Shanghai nickel futures dropped by more than 2%, mainly due to lowered global economic growth expectations. A slowdown in stainless steel demand and the diminishing effects of Indonesia's nickel ore export ban leave Shanghai nickel lacking upward momentum. The potential demand for nickel in the new energy sector will be a key focus in the future.
Strong Performance in Energy Commodities: SC Crude Oil Leads
The energy sector emerged as a market highlight, with SC crude oil climbing over 1%, making it one of the best-performing commodities. The international crude oil market is supported by production cuts from major oil-producing countries and improved demand expectations. Meanwhile, geopolitical uncertainty provides safe-haven support for oil prices.
The markets for low sulfur fuel oil and fuel oil also performed strongly, benefiting from a seasonal rebound in shipping demand and refinery operation adjustments. The overall tightening of fuel oil supply and demand provides momentum for price increases.
Palm Oil Slightly Rises: Interplay of External and Production Area Factors
Palm oil rose by over 1%, despite being dragged down by the low opening of Malaysian palm oil in the morning, unfavorable weather in production areas, and fluctuations in the ringgit exchange rate provided support for the price. Recent rainfall in Malaysia may impact palm oil production, while enhanced export competitiveness attracts more buyers. Future attention needs to focus on changes in the South American soybean and other vegetable oil markets.
Market Outlook: Divergence May Persist
Overall, the current domestic futures market lacks clear upward momentum, and the trends of various commodities are greatly influenced by fundamental supply and demand, macroeconomic policies, and global market linkages. Key areas to watch in the future include:
- Policy Guidance: Infrastructure and real estate stimulus policies may affect the recovery of industrial product demand.
- International Factors: Global economic growth expectations, geopolitical situations, and export orders' potential boost to prices.
- Weather and Supply: The impact of South American weather changes and major production area supply-demand dynamics on energy and agricultural products.
In the short term, the energy sector may continue to be supported by fundamentals, while industrial products need to wait for stronger demand recovery signals.
