<b>Wanhua Chemical’s MDI production capacity in China may increase to 2.6 million tons in the future</b>

<b>Wanhua Chemical '>

Recently, Wanhua Chemical disclosed at the investor meeting that in the next 3 years, Wanhua Chemical will improve the Several sets of MDI plants in China are expanding their production capacity. -US>/ increased to 1.5 million tons in / years, Wanhua Yantai Industrial Park from the current 60 10,000 tons / to 1.1 million tons / year.

Three Towers Consulting learned that Wanhua Chemical’s capacity expansion this time is not a new production capacity, but an expansion based on the original production capacity through technological improvement. The investment cost of this method is very low. It is said that compared with Under the circumstances, only 1/10 of the original new construction cost is less than; through the expansion of production capacity, Wanhua Chemical will further reduce the unit cost of the two places, and the competitive advantage will become more obvious. Wanhua's substantial capacity expansion plan seems to be a bit of a leap forward, but it is not the case based on the analysis of the new production capacity of MDI in China and around the world.

According to the MDI annual report of Suntowers Consulting, 2017 domestic MDI synthesis plant is 3.05 tons, 2017 annual domestic consumption 2.05 tons, a year-on-year increase of 6%. Suntoo predicts that 5 MDI consumption growth in China will remain 5-7 in the coming year %, so it is estimated that in 2020, the consumption of MDI in China will remain at 235-248 tons. It can be seen that 2018-2020 domestic new production capacity is mainly the second phase of Lianheng 24 tons, which has been put into production; Xtron plans to expand its MDI production capacity of 50 tons in Shanghai Caojing to 60 tons; in addition, Fujian Cornell Polyurethane 40 production capacity is planned to be put into production in 2020. There are still many uncertainties in the set of devices. In addition to the newly added 114 of Wanhua, Lianheng and Covestro, the domestic supply increase that can be expected in the next 3 In addition to 10,000 tons, Chongqing BASF has been operating at a low load, and there will still be a production capacity of nearly 200,000 tons to be released in the future.

Table 1 2018-2020New capacity of MDI in China

company	New capacity / 10,000 tons	Remarks
Wanhua Chemical	80	In the next 3 years, gradually expand
Covestro	10	2017Environmental impact assessment announced at the end of the year
Lianheng	24	2018The beginning of production
Xinjiang Juli	40	Planned
Fujian Cornell	40	Environmental assessment has passed, and it is expected to be put into operation in 2020

From a global perspective, 2017 global MDI synthesis plant production capacity was in 8.04 tons, 2017 global polyurethane consumption 6.75 tons, a year-on-year increase 5%. Suntoo predicts that in the next 5 years, with the recovery of European and American economies, the strong demand for polyurethane in Southeast Asia, the Middle East and Africa will support MDI Consumption growth will also remain above 5%. 2020The global consumption of MDI will remain at 7.76 tons. Considering the start-up load and the running-in period of some new devices, by the end of 2020 there must be 1.60-1.8 million tons of production capacity released. As for the new global production capacity in 2020, in addition to the domestic new production capacity introduced above, BASF announced at the beginning of 2018 Expanded its 300 production capacity in Geismar, USA to 600,000 tons; Wanhua Chemical started production in Louisiana, USA The 40 new production capacity of 40, together with the expansion of the 80 production capacity in the two places in China disclosed by Wanhua just now; In 2018, Covestro expanded Germany's 18 tons to 40 >10,000 tons, expand Spain from 17 tons to 22 in 2020 The plan of SPAN>10,000 tons and China's 500,000 tons expanded to 600,000 tons; overall as of 2020, the newly added production capacity will be 2.11 tons.

Table 2 2018-2020 new global MDI production capacity

company

Fujian Cornell

Environmental assessment has passed, and it is expected to be put into operation in 2020

Table 3 2020Global MDIConsumption and Capacity Forecast

	2017	2020E
MDIConsumption/Ten thousand tons	675	776
MDIcapacity/10,000 tons	804	964-984
Added production capacity in the next 3 years (2018-20202018-2020)	211 tons, globally determined by the end of 2020 Production capacity is 10.15 tons, excluding 80 tons of Wanhua, it is 935</SPAN SPAN> 10,000 tons, compared with 964 tons, there is still a small gap.

Go back to Wanhua Chemical and combine the above data; we can see that this expansion of Wanhua Chemical is not only aimed at the part of the next 3 years supply gap, and more importantly, after experiencing the good momentum of MDI high profitability levels in 2016-2017, the current Large MDI manufacturers have entered a period of concentrated expansion of production capacity, and Wanhua relies on its unique technology and Cost advantage, and further enhance its competitive advantage in the MDI market by expanding production capacity. Therefore, from the perspective of the MDI market with more players, rapid release of new production capacity, and increasingly fierce competition in the MDI market, this time Capacity expansion is on the verge of completion. If the capacity expansion in China and China is completed this time, Wanhua's global production capacity will account for nearly 30% by 2020, It still occupies the top spot in the global MDI production capacity supply, and still occupies a dominant position in MDI product quality and cost. Moreover, Wanhua's capacity expansion plan this time will account for 45% of the total new production capacity in the next 3 years. According to the capacity expansion plan, it is expected that by 2020, the global MDI supply will be short-term in short supply. In the future, Wanhua's production capacity can be further expanded. Together with the production capacity of 400,000 tons in the United States 2020, Wanhua's global The market share of MDI will be further expanded, and the supply side of the global MDI market will be more sufficient in the future.

ss=MsoNormal style="TEXT-ALIGN: left" align=left>MDIcapacity/10,000 tons

804

964-984

Added production capacity in the next 3 years (2018-20202018-2020)

211 tons, globally determined by the end of 2020 Production capacity is 10.15 tons, excluding 80 tons of Wanhua, it is 935</SPAN SPAN> 10,000 tons, compared with 964 tons, there is still a small gap.