The high prosperity of the domestic manufacturing industry has driven the demand for basic chemical products to rebound. On February 22, the chemical sector continued to advance by leaps and bounds, and the basic chemical sector was particularly active. Analysts pointed out that crude oil prices have risen sharply, and chemical products have entered a stage of overall rise. The gap between overseas supply and demand is obvious, and the export market for chemical products in the first half of the year is likely to exceed expectations.

Increase in export orders

After the Spring Festival, the prices of some chemical products rose. Among them, PVC, viscose staple fiber, spandex, ethylene glycol, MDI, etc. increased significantly.

A company is mainly engaged in the production and sales of PVC resin, caustic soda chemical raw materials and their processed products. On February 22, relevant business executives of the company told a reporter from China Securities News that “during the Spring Festival, due to cold waves and other factors, the production load of PVC-related equipment in Europe, America, Japan and other regions decreased, and global PVC supply is expected to be tight in the first quarter.” After that, the company's PVC-related product prices rose significantly, with an average increase of 13% to 15%.

It is understood that since late August last year, the shortage of PVC supply in overseas markets has been intensified, prices have risen, the PVC export arbitrage window has opened, and the number of export orders has increased significantly. This has also exacerbated domestic supply tensions.

Since the third quarter of 2020, Xinjin Road's performance has improved significantly and continued to strengthen in the fourth quarter. The company expects to achieve a net profit of 68 million to 96 million yuan in 2020, a year-on-year increase of 9.65% to 54.81%; net profit after deduction is 60 million to 85 million yuan, a year-on-year increase of 19.33% to 69.05%.

Since the fourth quarter of 2020, the price of viscose staple fiber has gradually increased. At the end of 2020, the implementation of the plastic restriction order and the policy of prohibiting the import of solid waste has increased the demand for pulp, the price of pulp has accelerated, the supply of wood pulp has intensified, and the price of viscose staple fiber has also accelerated. On February 21, Zhongtai Chemical disclosed that the company's current inventory of viscose staple fiber and yarn is low, and it has certain profitability. The market price of viscose fiber is around 15,000 yuan/ton, and it is expected that the viscose market will fluctuate upward in 2021.

Related companies benefit

According to industry insiders, the strength of the chemical sector is caused by many factors. Recently, the prices of most chemical products have continued to rise. The current inventory of viscose and polyester filaments in the chemical fiber field is extremely low. The continued strength of the procyclical chemical sector is a high probability event.

Shenwan Plastics sub-industry performed well. The plastic restriction order has boosted the demand for biodegradable plastics and papermaking, and at the same time stimulated the price of white cardboard to hit a record high. A leading technology company in biodegradable plastics has increased by nearly 70% this year.

The person in charge of the company's technology told reporters that before the plastic restriction order, the domestic demand for degradable plastics was very small. Previously, 80% of the company's raw materials were sold abroad, and the domestic annual sales volume was only 10,000 tons. In January this year, the company's production of biodegradable plastic raw materials increased 10 times year-on-year.

The company's technology predicts that the net profit attributable to shareholders of listed companies in 2020 will be between 4.535 billion yuan and 4.680 billion yuan, an increase of 3.290 billion yuan to 3.436 billion yuan compared with the same period of the previous year, an increase of 264% to 276%. The company said that in 2020, the company's modified plastics business has a reasonable global production capacity layout and a steady increase in profits; the market demand for new material products has increased significantly, and the company's production capacity has increased significantly.

After the Spring Festival, the prices of long fiber, short fiber, and spandex in the upstream of textiles and garments began to rise. The stock prices of companies such as Xinfengming, Sanyou Chemical and Huafeng Chemical have all risen sharply in recent days.

Xinfengming announced that since the fourth quarter of 2020, with the recovery of downstream demand, the company's product profitability has gradually recovered. Coupled with the commissioning of new production capacity, the company's net profit attributable to shareholders of listed companies in the fourth quarter is expected to increase by 28.55% to 56.65% year-on-year.

Continued restoration of prosperity

Many insiders believe that the chemical sector has long-term investment value. Leading chemical companies rely on core R&D and cost competitiveness to achieve long-term deterministic growth through capacity expansion and industrial chain extension.

Wang Zhe, chief energy and chemical analyst at CITIC Securities, believes that as the global macro economy enters a recovery path, the demand for major chemicals will increase. The cold wave in North America has interrupted the supply of chemicals in the region, and it is expected that the price increase of chemicals will continue until after mid-March.

Driven by the upward trend of oil prices and expectations of economic recovery, the chemical industry's prosperity will continue to recover. Many institutions recommend that investors focus on leading stocks in the chemical sub-industry.

The latest research report of Shenwan Hongyuan pointed out that during the Spring Festival, due to the relief of overseas epidemics and the impact of cold current, crude oil prices rose sharply, overseas supply and demand gaps were obvious, and chemical products entered a stage of overall rise. In the short term, the apparel industry chain and agrochemical sector are still in the stage of restocking. The export of chemical products in the first half of the year is expected to exceed expectations.

Article information source-China Securities Journal