Sep-Oct nylon: beware oil price bottoming’s negative pressure

It is difficult for the current nylon industry chain to overcome its challenges relying solely on its own strength. Future changes will still depend on external policies and macroeconomic factors.

In fact, we have recently observed some changes at the industrial end. For instance, at the fabric end, some autumn and winter fabrics have started to see a slight increase in sales. On the raw material end, there seem to be some ambiguous news about production cuts for CPL.

While these marginal changes are certainly positive, they are still insufficient to reverse the downturn. The increase in fabric sales has not yet driven up the sales of nylon yarn, let alone inventory reduction.

Apart from the planned production cuts by Yangmei that have begun to be implemented, other news about CPL production cuts mostly remains in the planning stage, with the timing and scale of implementation still uncertain. The situation needs to be closely monitored.

From an external industry perspective, the recent trend in oil prices is concerning and may become the biggest obstacle to the "Golden September and Silver October" market performance.

On the daily chart, after previously falling below $65/barrel, the support level has turned into a resistance level. This week, the first rebound failed to break through this level. After an ABC three-wave rebound, it is highly likely that prices will decline again upon touching $66/barrel.

From the weekly chart structure, if this round of decline continues, there is a certain probability of forming a double-bottom structure on the weekly level.

From the perspective of the industry chain, the supply-demand balance for benzene in September-October is generally estimated to be balanced, with neither significant inventory accumulation nor reduction. Consider this: if oil prices fall below $60, benzene is likely to follow the decline. How will CPL respond? How will the nylon industry chain perform?

In September, seasonal demand may see some recovery, but the key lies in whether the volume is sufficient. If industry chain prices remain weak, demand may, at best, briefly stabilize before declining again. Therefore, during this peak season, it is currently advisable not to act hastily.