The familiar pre-holiday plunge in CPL

As of this week ending Sep 28, the spot price of CPL in the East China market has tumbled to 8,350yuan/mt. In the last three working days before the National Day holiday, the weighted average price of CPL RMB spot may continue to decline. Moreover, CPL-benzene price spread is once again testing the 2,500yuan/mt threshold after July.

In terms of absolute prices, CPL had maintained a consolidating trend earlier in September, hovering around 8,700yuan/mt. Although downstream demand was generally weak and market sentiment remained pessimistic, CPL prices struggled to hold at 8,700yuan/mt, managing to avoid setting a new yearly low. The previous yearly low was 8,600yuan/mt.

The factors triggering the price plunge are mainly two:

1. Fluctuations in benzene prices. Starting from September 18, bulk commodities, especially energy and chemical products, opened with significant declines and accelerated their downward trend in the following days, hitting new lows. Benzene and styrene followed similar trends, both reaching short-term lows. Affected by this, sentiment in the CPL and downstream sectors weakened.

2. High operating rates at CPL plants. Despite persistently low processing margins, CPL plants seem unaffected, maintaining stable operating rates. The limited maintenance plans from the beginning of the month were gradually resumed in the latter half, pushing operating rates back above 90%. Downstream chip production rates remained around 75%, indicating that CPL still faces oversupply pressure.

In addition to the above two factors, pre-sales for the National Day holiday meant that sales pressure in the latter half of the month was greater than usual. Coupled with pessimistic post-holiday market expectations due to new plant startups, it was no surprise that CPL experienced a pre-holiday plunge. The lack of surprise stems from the recurring trend of price drops during holidays in recent years, and this year's National Day holiday was no exception.

Based on the CPL RMB spot price of 8,350yuan/mt and benzene's closing price of 5,870yuan/mt on Sep 28, the CPL-benzene price spread reached 2,480yuan/mt. After deducting transportation costs on both ends, the actual processing margin averaged less than 2,000yuan/mt, or even as low as 1,900yuan/mt. How long do CPL plants plan to hold on?