5 Dec.2020
From October 1st to November 20th, with the gradual landing of the US general election, the market expects that global trade frictions will ease, and the superposition of COVID-19 vaccines has frequently been positive, and the index has begun to rise. The Shanghai Composite Index rose 4.94%, the Shenzhen Component Index rose 7.32%, and the Growth Enterprise Market rose 3.61%. The price of Brent crude oil futures fell first and then rose. The overall price rose 7.40% to close at 45.24 US dollars per barrel; WTI futures prices rose 6.06% to close at 42.27 US dollars per barrel. The rebound in crude oil prices was more than transmitted to the petrochemical sector, and the prices of petrochemicals all rose due to the rapid rebound in downstream demand. The price of naphtha fell by 3.82%, the price of ethylene rose by 7.74%, the price of toluene rose by 7.23%, the price of butadiene rose by 66.28%, and the price of pure benzene rose by 30.06%.
Since October, weak demand and the gradual recovery of production have exerted certain pressure on crude oil prices. In early October, hurricane-affected production declines in the Gulf of Mexico combined with production declines caused by Norwegian workers’ strikes helped boost crude oil prices. However, as the European epidemic worsened, some countries once again blocked cities, the market worried that crude oil demand would return to uncertainty, and oil prices fell again. At present, US crude oil has recovered to 10.9 million barrels per day, an increase of 400,000 barrels per day from the previous month. Commercial crude oil inventories are 489 million barrels, still at a high level in the past five years. Overall, the fundamentals are relatively weak, but as the capital market's expectations of future inflation rise, crude oil prices may still rise in the short term. Oil prices in 2021 will be mainly affected by the control of the epidemic and the overall economic recovery, and prices will have strong cost support.
Since October, although the crude oil market has experienced some twists and turns, it has maintained an upward trend as a whole. The market has strong expectations of demand recovery and prices have a certain degree of support. The downstream demand for domestic petrochemical products has recovered beyond expectations, the prices of petrochemical products have risen rapidly, and the level of spreads has been restored. The polyester filament market is driven by textile replenishment, and the overall market price continues to rise. The current inventory is higher than the central level, and subsequent price support depends on overseas conditions. The PVC market has also gone up, with prices hitting highs in recent years, but subsequent downstream demand may fall, and prices are at risk of falling. If the overseas epidemic is gradually brought under control and the economic recovery is expected to increase, there will still be room for price increases in major categories of chemicals, and the bottom of the profits of traditional chemicals will be repaired upwards. In the process of recovery of the industry’s prosperity, it is recommended to pay attention to leading companies with high integration and good cost control, and maintain the industry’s “synchronized market” rating.
Risk warning: overseas epidemic control and terminal demand recovery are less than expected; new production capacity release exceeds expectations.
1. October 2020 chemical sector market
1.1 Review of the sector market
From October 1st to November 20th, with the gradual landing of the US general election, the market expects that global trade frictions will ease, and the superposition of new crown vaccines has frequently been positive, and the index has begun to rise. The Shanghai Composite Index rose 4.94%, the Shenzhen Component Index rose 7.32%, and the Growth Enterprise Market rose 3.61%. The top sectors with the highest gains and losses are: automobiles (24.96%), household appliances (20.06%), non-ferrous metals (17.97%), steel (17.82%), and chemicals (12.82%); the sectors with the lowest gains and losses There are leisure services (-9.24%), computers (-2.97%), agriculture, forestry, animal husbandry and fishery (-2.48%), medical biology (-1.74%), and commercial trade (-1.64%).
From October 1st to November 20th, the price of Brent crude oil futures fell first and then rose. The overall price of Brent crude oil futures rose by 7.40% to close at US$45.24 per barrel; WTI futures prices rose by 6.06% to US$42.27 per barrel. The rebound in crude oil prices was more than transmitted to the petrochemical sector, and the prices of petrochemicals all rose due to the rapid rebound in downstream demand. The price of naphtha fell by 3.82%, the price of ethylene rose by 7.74%, the price of toluene rose by 7.23%, the price of butadiene rose by 66.28%, and the price of pure benzene rose by 30.06%.
From October 1st to November 20th, the Shenwan Chemical Index rose by 9.5 percentage points, surpassing the major market indexes. Among the sub-sectors, the top-ranked sub-sectors are: spandex (34.3%), polyester (32.8%), nitrogen fertilizer (31.0%), polyurethane (28.0%), and phosphorus chemicals (20.7%); The sub-sectors are: petroleum trade (-8.3%), other rubber (-4.1%), chlor-alkali (-3.9%), coatings (-0.8%), daily chemicals (1.9%).
1.2 Market data
In terms of valuation, as of November 20, the PE (TTM, excluding negative values, median) of all A shares was 40.72X, and the PE (TTM, excluding negative values, median) of Shenwan Chemicals sector was 41.91X, estimated The value is 1.19X premium compared to A shares. Among the sub-sectors, high valuations include soda ash, fluorine chemical, and viscose; relatively low valuations are petrochemicals, textile chemicals, and modified plastics.
2. Important events and announcements in the industry
1. Huitian New Materials (300041.SZ) announced that Changzhou Huitian New Materials Co., Ltd., the company's holding subsidiary, plans to invest 58 million yuan in self-raised funds to build a solar cell back film project with an annual output of 30 million square meters; the company is wholly-owned The subsidiary Shanghai Huitian New Materials Co., Ltd. invested 12 million yuan in self-raised funds to build a photovoltaic organic silica gel project with an annual output of 18,700 tons. After the new production line is completed and put into operation, Changzhou Huitian's solar cell back film production capacity will increase by more than 60%, and Shanghai Huitian's photovoltaic single-component silicone production capacity will increase by more than 58%.
2. On October 19, Hujiao rose sharply, hitting the daily limit, with a range of about 500 CNY/ton. The spot rubber price adjusted with the market, and the market was full of wait-and-see atmosphere. The price of natural rubber from Zhejiang Wanfang Trading Co., Ltd.: Shanghai Warehouse, Yunnan/Hainan Baodao whole milk price in 18 years is about 13,400 CNY/ton. Qingdao library, Yunnan/Hainan Baodao whole milk price in 18 years was around 13,400 CNY/ton, and Guangken whole milk price in 19 years was around 13,450 CNY/ton. Tianjin Library, Yunnan/Hainan Baodao whole milk price was around 13,270 CNY/ton in 19 years. Rising rubber prices are not conducive to industrial products that use rubber as raw materials. Rubber accounts for about 70% of tire production costs. A sharp rebound in rubber prices will weaken the profitability of domestic tire companies.
3. Linglong Tire released its report for the third quarter of 2020. In the first three quarters, it achieved operating income of 13.247 billion yuan, a year-on-year increase of 5.90%; net profit was 1.599 billion yuan, a year-on-year increase of 31.64%; basic earnings per share were 1.34 yuan. On the one hand, the substantial increase in the company's profits is due to the continuous low prices of raw materials in the first three quarters; on the other hand, the company has increased its retail promotion efforts, adjusted the company's product structure, and increased its gross profit. In the third quarter, the American tire market gradually recovered, which provided support for the company's export business to resume.
4. Wanhua Chemical disclosed its third quarterly report, the company's operating income for the first three quarters of 2020 was 49.23 billion yuan, a year-on-year increase of 1.43%; net profit was 5.35 billion yuan, a year-on-year decrease of 32.28%. The decline in the company's performance was mainly due to the decline in the price of product MDI compared to the same period last year, and the company's newly expanded propylene and derivative products also faced a year-on-year decline in profit levels, causing fluctuations in the company's performance.
5. Hunan Haili (600731.SH) achieved operating income of 1.347 billion yuan in the first three quarters, a year-on-year decrease of 12.60%; net profit attributable to shareholders of listed companies was 205 million yuan, an increase of 162.63% year-on-year; non-recurring deductions attributable to shareholders of listed companies The net profit of sexual gains and losses was 203 million yuan, a year-on-year increase of 118.95%; basic earnings per share were 0.5758 yuan. The growth of the company's performance was mainly due to the increase in the prices of heterocyclic products and organic phosphorus products by more than 10%, while the prices of raw materials remained stable, which increased the company's gross profit margin.
6. Zhongtai Chemical (002092.SZ) realized operating income of 64.97 billion yuan in the first half of the year, a year-on-year increase of 0.71%; realized attributable net profit of -446 million yuan, a year-on-year decrease of 202.9%. The net cash flow from operating activities was 3.708 billion yuan, a year-on-year decrease of 0.73%. The company's net profit in the third quarter was 139 million yuan, a year-on-year decrease of 333.3%, and the quarter-on-quarter loss narrowed. With product prices bottoming out, the company is expected to turn losses in the fourth quarter.
3. Industry product price tracking
Petrochemical sector: Since October, weak demand and the gradual recovery of production have exerted certain pressure on crude oil prices. In early October, hurricane-affected production declines in the Gulf of Mexico combined with production declines caused by Norwegian workers’ strikes helped boost crude oil prices. However, as the European epidemic worsened, some countries once again blocked cities, the market worried that crude oil demand would return to uncertainty, and oil prices fell again. At present, US crude oil has recovered to 10.9 million barrels per day, an increase of 400,000 barrels per day from the previous month. Commercial crude oil inventories are 489 million barrels, still at a high level in the past five years. Overall, the fundamentals are relatively weak, but as the capital market's expectations of future inflation rise, crude oil prices may still rise in the short term. The oil price in 2021 will be mainly affected by the control of the epidemic and the overall economic recovery, and the downward price will have strong cost support.
Oil prices rebounded more slowly, but demand for petrochemical products recovered strong, and downstream plastics, chemical fibers and rubber products entered the peak demand season. The price gap between petrochemicals and crude oil has widened rapidly, increasing the profits of petrochemicals. Among them, the price difference between ethylene and naphtha widened by US$74/ton, the price difference between toluene and naphtha widened by US$39/ton, the price difference between butadiene and naphtha widened by US$539/ton, and the price difference between pure benzene and naphtha widened by 131 USD/ton.
Since October, the polyester filament market has risen strongly, and the overall market turnover has recovered. After the November holiday, the price of polyester filament has risen sharply. Due to the double eleven stockings and the transfer of overseas orders, terminal weaving demand for autumn and winter is rapidly warming up. Driven by this, the production and sales data of the polyester filament factory has been significantly increased for several consecutive days, and the center of market trading has also increased, and the production and sales situation The improvement in the production of polyester filaments has pushed the finished product inventory of polyester filament factories to decline significantly, which has supported the price increase of polyester filaments. Downstream grey fabrics: On the one hand, we are preparing stocks for overseas Christmas, and on the other hand we have made certain raw materials stocking for this year's cold winter. After the rapid destocking in the early period, the price of polyester has risen. Follow-up needs to pay attention to the recovery of overseas orders. If the recovery of overseas demand does not continue, the industry chain will enter the traditional off-season in December, and polyester prices will continue to fluctuate.
PVC sector: PVC spot market prices have continued to rise since October, with prices rising to 8,100 CNY/ton. The fundamentals are generally good. Part of the inventory of manufacturers is used to fulfill previous export orders, and the actual saleable inventory is low. On the one hand, the increase in prices is due to the large production capacity involved in the maintenance plan and the large amount of maintenance losses. On the other hand, the overseas demand shifts and the export situation is good, which has intensified the tight domestic supply. The start of construction in the middle and lower reaches reflects the continuous increase in demand in North China in the third quarter, but as the weather turns cold, there is limited room for improvement in demand in North China. The situation of social inventory continues to de-decay, and the inventory level is further reduced, but it will enter the traditional accumulation stage towards the end of the year. Under the background that overseas demand has not continued to rise, it is expected that the subsequent maintenance equipment will resume and the downstream start-up will be slow, and the price of PVC may be at high risk of falling.
4. Core views of the industry
Since October, although the crude oil market has experienced some twists and turns, it has maintained an upward trend as a whole. The market has strong expectations of demand recovery and prices have a certain degree of support. The downstream demand for domestic petrochemical products has recovered beyond expectations, the prices of petrochemical products have risen rapidly, and the level of spreads has been restored. The polyester filament market is driven by textile replenishment, and the overall market price continues to rise. The current inventory is higher than the central level, and subsequent price support depends on overseas conditions. The PVC market has also gone up, with prices hitting highs in recent years, but subsequent downstream demand may fall, and prices are at risk of falling. If the overseas epidemic is gradually brought under control and the economic recovery is expected to increase, there will still be room for price increases in major categories of chemicals, and the bottom of the profits of traditional chemicals will be repaired upwards. In the process of recovery of the industry’s prosperity, it is recommended to pay attention to leading companies with high integration and good cost control, and maintain the industry’s “synchronized market” rating.
2019-2021 is the peak period for the domestic refining and chemical production capacity to be put into production. The profits of the industrial chain will be redistributed, and the PTA and polyester filament links will gain more bargaining power. It is recommended to pay attention to: Hengyi Petrochemical, Rongsheng Petrochemical, Tongkun Stock; The differentiated polyester market is growing steadily. It is recommended to pay attention to: Hailide.
The advent of the epidemic has accelerated the clearing of PVC industry capacity, and new capacity is limited, and the industry is expected to bottom out. As the pressure on environmental protection increases, the nation's calcium carbide resources are becoming more and more tense, and chlor-alkali enterprises that own calcium carbide will benefit. Leading companies benefit from the high degree of industrial chain integration, and we suggest paying attention to: Zhongtai Chemical.
With the decline in production capacity growth and the bottoming of downstream automobile demand, the bottom of the soda ash industry profits reversed. It is recommended to pay attention to the leading soda ash company: Sanyou Chemical.
The brand effect of the leading companies in the tire industry is apparent, and the global layout provides a higher moat. Downstream automobile sales demand bottomed out and rebounded, driving the industry's prosperity. Suggested attention: Linglong tires.
5. Risk Warning
The overseas epidemic control and the recovery of terminal demand fell short of expectations; the addition of new production capacity exceeded expectations.
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