In the first quarter of this year, the prices of domestic chemical products fell by 12% as a whole. The new production capacity continues to be released, but the overall demand is lower than expected, and the domestic chemical industry is facing a new round of supply-demand imbalance challenges.
With the high international crude oil prices, the differentiation of upstream and downstream benefits has increased significantly, and the benefits of oil and gas exploration have increased significantly. However, the profits of the downstream chemical industry have fallen sharply. At present, the domestic chemical industry has the challenge of continuous release of new production capacity but the overall demand is not as expected.
According to data from the China Petroleum and Chemical Industry Federation, my country's oil refining capacity will reach 920 million tons in 2022, and its ethylene production capacity will reach 46.75 million tons per year, ranking first in the world for the first time. Relevant parties in the industry stated that they should be vigilant against the signs of overcapacity in the chemical industry, strengthen the monitoring of production capacity expansion of hot chemical products, and avoid blind investment by rushing into the market; further standardize the market order, crack down on non-compliant production capacity that disrupts the market, and promote the normalization of the refined oil market.
"This year, the apparent consumption growth rate of polyolefins in the chemical refining and chemical industry is 5.0%, while the domestic production capacity increases by 12.2%. The imbalance between supply and demand will lead to intensified competition and insufficient plant operating rate." Li Suoshan, vice president of Sinopec Chemical Sales Company, predicts. At present, the recovery of downstream demand in the domestic chemical market is slower than expected, and the contraction of overseas demand is superimposed, which has become an important reason for the lack of demand in the industry.
According to data from Zhuo Chuang Information, the average domestic chemical price index in the first quarter of this year was 1350.3, down 12% from the same period last year. Under the influence of the contradiction between supply and demand, the overall decline in the chemical market is more obvious. Some chemical companies are facing pressure to survive, with high raw material costs, outdated production capacity, and equipment with reduced competitiveness, or normal phased shutdowns and closures.
"As far as the polyolefin market is concerned, this year's weak external demand, unstable domestic demand, and supply expansion make the market still face greater pressure in the second quarter. In the future, we need to pay close attention to the maintenance and production reduction actions of the supply side." Guotai Junan Futures Chemical Industry Analyst Zhang Chi It is believed that under the squeeze of low profits and strong cost in the chemical industry, the cost may further increase in the second half of the year, and the market's choice may be to either reduce production or bear greater losses.
"Both chemical production companies and trading companies face two major inventory risks: one is the inventory risk of raw materials, and the other is the inventory risk of products. To avoid the operation of the two major inventory risks, the solution is mainly to carry out hedging on futures " said Ge Rui, deputy general manager of Zhejiang Hengyi International Trade Co., Ltd.
Under the imbalance between supply and demand in the market, the enthusiasm of enterprises to participate in the chemical market is high. In 2022, the delivery volume of DCE's chemical futures will reach a record high of 1.21 million tons, and the enthusiasm of enterprises to participate in delivery has increased significantly. At the same time, the off-site business transactions in the chemical sector are active: in 2022, the off-site transactions will reach nearly 33 billion yuan, an increase of 57% year-on-year, which will strongly support chemical companies to manage risks and stabilize supply and marketing by combining futures and cash with business; in 2022, participate in the chemical futures market of DCE The average daily open interest of industrial enterprises in the industry is 1.2 million lots, a year-on-year increase of 41%.
It is worth noting that in 2022, when the volatility of the overseas energy and chemical sector will intensify, the chemical sector of DCE will maintain a stable and rational operation. The role of ensuring supply and stabilizing prices and enhancing the resilience of the industrial chain is prominent.
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