Tguan, Bpplas & Scientex
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| 5 year Resin Price Trend
Based on above 2 chart, it is very clear that the general trend of oil price and resin price are very similar.
However, I noted a key different. While oil price has sharp fall by approximately 72% (from USD 106 to USD 28 per barrel), the resin price has corrected for about 40 % (from USD 0.83 per pound to USD 0.495 per pound).
1 pound = 453.59 grams
I assumed that the sharp drop of oil price exceeded drop in resin price telling us that the margin for resin manufacturer has probably squeezed to the max and the margin is super thin.
Such low resin price has undoubtedly help to improved the margin of plastic film manufacturers by:
(1) Lower the product selling price to increased competitiveness.
(2) Higher business volume (by giving more discount) which generated overall more dollar profit.
That's the reason why you see Thong Guan and other Plastic Film manufacturers recorded much lower revenue figures, but profit experienced double digit growth.
With the current situation of oil market, i believe the resin price will continue to be low.
The NEXT big question: Is the oil going to continue rally?
I doubted it for several reason: 1) USA oil rigs drop has flatten (reach the bottom?). And the latest article i read about says that USD 40 per barrel now is enough to trigger the activation of shale oil rig. 2) Current over supplied oil needs long time to consumed. 3) Recent oil rally is due to POTENTIAL oil production cut. i.e. market has "built-in" this info and therefore causing oil price rally. The meeting of oil cut will be held in April 2016. I suppose this is call "market is very efficient" in reflecting the future possible event. Now 2 scenario: cut production - which i will see limited upside OR, no cut in production - oil price collapsed again. IS RINGGIT to TOUCH RM 3.80? May or May Not. Cheers! |
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