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Since the beginning of this year, the prosperity of the chemical industry has continued to decline, and various chemical products have experienced significant fluctuations during the year. Recently, under the influence of multiple factors such as lower crude oil prices and downstream maintenance, weak cost-side support has led to a significant decline in chemical product prices. Against this background, downstream terminal products have entered a period of rising profits.
According to statistics, among various chemicals recently, the overall price decline of polyethylene and polypropylene products downstream of olefins has been relatively small, and product spreads have remained stable; EVA prices have fallen slightly, and product spreads have expanded; styrene prices have also declined significantly. In addition, there are many varieties that have seen price declines due to the impact of demand. For example, the price of pure benzene has dropped sharply due to the shutdown of some downstream styrene, phenolic ketone and other equipment for maintenance; polycarbonate has gradually changed its downstream demand as winter has entered in both the north and south of the country. Entering the traditional off-season, demand-side support is weak and product prices have declined.
The decline in the price of basic chemical raw materials will be beneficial to the increase in profits of end products, among which industries such as tires, compound fertilizers, and pesticide preparations are becoming increasingly warm.
Recently, the pesticide preparation company Nopson stated in an institutional survey that the price of raw materials will drop significantly in 2023, forcing channels to destock. The current channel inventory has dropped significantly, and it is expected to enter a replenishment state in the future. The relevant person in charge of the company said, “Because the price of upstream original drugs is at a low this year and procurement costs have dropped significantly, the gross profit margin of products next year is expected to increase by 2%-3%.”
Facing the current raw material market industry, new materials company Ruitai New Materials recently stated that the company continues to track and conduct in-depth analysis of the main raw material markets, regularly formulates procurement plans, and adjusts the procurement scale during peak and trough periods to reduce the adverse effects of raw material price fluctuations. “The decline in raw material prices will reduce the cost of the company’s related products to a certain extent; at the same time, the company conducts frequent small-batch purchases and tries to move in and out as quickly as possible.”
The performance of the tire industry is also obvious. Since the second half of this year, the tire industry has ushered in a booming atmosphere due to multiple boosts such as falling raw material costs, increased demand, and reduced shipping costs.
Since December, many tire companies such as Linglong Tire and Senqilin have repeatedly stated to the outside world that production is in short supply.
Linglong Tire stated on the interactive platform that the company’s current orders for semi-steel tires are booming, and orders are still greater than production capacity; Sen Qilin said that the company’s production and sales were booming in October and November, semi-steel tires continued to operate at full production, and all-steel tire production and sales continued to climb, and operations The situation is stable and good. According to the communication with customers, it is expected that orders for next year will still be full. Sailun Tire said that the company’s domestic and foreign factories are currently producing and operating normally, and the order volume and operating rate are at a relatively high level. The company will continue to have orders and operating rates for next year. Maintain confidence at a high level.
Since October, the prices of the main raw materials upstream of tires have begun to decline. Data shows that as of December 7, the main rubber futures price was 13,355 yuan per ton. In less than 2 months, the rubber futures price dropped by nearly 1,700 yuan per ton. During the same period, carbon black prices fell even more. Zhuochuang Information data showed that carbon black fell by 14.67% and 10.02% month-on-month respectively. In addition, raw materials such as antioxidants also declined to varying degrees.
Longzhong Information believes that in the later period, the raw material level may continue to weaken, and it is expected that the carbon black market may still decline in the later period. The price of raw materials has fallen, the cost of tire raw materials has declined, and corporate profits have shown a trend of increasing.
The current prosperity of the chemical industry continues to be low. Brokerage analysts believe that with the overall chemical industry in the bottom shock stage, the current downward risks of the chemical industry have been significantly alleviated, and the prosperity is expected to bottom out next year.
Galaxy Securities believes that against the background of weak cost-side support, chemical product prices have fallen significantly. Looking forward to 2024, the center of gravity of oil prices may fall slightly, and the cost end will no longer be the key to the industry’s profitability; under the situation of internal and external demand restoration resonance and active inventory replenishment, the overall chemical industry boom is expected to rise in 2024, and there is a structural market.
Guosen Securities said that considering the relative resilience of the global macro and the expected end of the Federal Reserve’s interest rate hike cycle, as well as the successive introduction of domestic support policies for real estate and other industries, domestic and foreign demand for chemical products is expected to resume growth, and the overall prosperity of the chemical industry is expected to hit the However, considering the large-scale supply-side capital expenditures in the midstream industry and the slowdown in demand growth for traditional chemical products in the downstream chemical industry, the contradiction between supply and demand in the chemical midstream subdivision industry is prominent, and profit levels will still be are at historically low levels.
