2023Q1 Polymerized MDI: Bottom grinding in slow recovery

The performance of aggregated MDI in the first quarter was lower than that of the same period last year
In the first quarter of this year, the domestic polymeric MDI market operating range was 14,300-16,800 yuan/ton, and the quarterly average price was 15,607 yuan/ton, compared with the average price of 20,313 yuan/ton in the same period last year, a year-on-year decrease of 23%. The market sentiment in April is still weak. As of April 6, the domestic polymeric MDI market price is 15,000-15,200 yuan/ton.

The recovery of downstream demand in the first quarter was not as good as expected, and the average price dropped significantly in the dragging quarter. Is there still room for the market to continue to decline in April? We might as well get a feel from some published economic and manufacturing activity statistics. Is there any foreshadowing of the “Spring River Plumbing Duck Prophet” for the recovery of downstream demand for domestic aggregated MDI?

The domestic economy stabilized and recovered from January to February
On March 15, according to the National Bureau of Statistics spokesperson’s answer to reporters’ questions about China’s economic performance from January to February this year, he introduced:
“Since the beginning of this year, with the rapid and steady transition of epidemic prevention and control, the effect of stabilizing economic policies has continued to appear, and the overall economic operation has shown a trend of stabilization and recovery. Production demand is picking up and improving.
From the perspective of production: From January to February this year, the added value of industrial enterprises above designated size increased by 2.4% year-on-year, compared with an increase of 1.3% in December last year, a rebound of 1.1 percentage points. From the perspective of manufacturing PMI, the manufacturing PMI rebounded to 52.6% in February, reaching a relatively high level in recent years. In March, the fluctuation of PMI fell to 51.9, and the level of prosperity was still the second highest point in the past two years, reflecting the manufacturing industry. The expansion trend is maintained, the development of market entities is expected to improve, and the vitality of market entities tends to increase.
From the perspective of demand, from January to February this year, the total retail sales of social consumer goods increased by 3.5% year-on-year. Investment in the first two months of this year increased by 5.5% year-on-year, 0.4 percentage points faster than the growth rate for the whole of last year.
In general, the economic operation from January to February showed a trend of stabilization and recovery as a whole. Of course, we must also be aware that economic development this year still faces many difficulties, the international environment is still complex, world economic growth tends to slow down, major economies have serious inflation problems, and there are many unstable and uncertain factors such as geopolitics. From a domestic point of view, the current economy is still in the initial stage of recovery, and some long-term accumulated structural problems are more prominent. Stabilizing economic operation and promoting overall economic improvement still require arduous efforts. “

From January to February, the growth rate of real estate indicators such as real estate development and investment “uplifted”

Construction is a major downstream industry for aggregated MDI. There is a high correlation between national real estate development investment, housing construction and completion and the demand in the aggregated MDI construction field. According to the latest data released by the National Bureau of Statistics, the above indicators have rebounded and “upwardly” trended from January to February this year.

Consumer confidence index is also recovering slowly
From January to February this year, after the optimization and adjustment of the domestic epidemic prevention policy, China’s consumer confidence index, month-on-month growth and year-on-year growth all showed signs of recovery with a slow recovery. According to the latest statistical data, in February this year, China’s consumer confidence index was 94.7, and the consumer expectation index in the same period was 98.4, reflecting everyone’s expectation that the market outlook will continue to recover and improve.

Summary:
To sum up, some of the reference indicators we have enumerated all reflect the common ground of “slowness” and “recovery” since this year. Although the current domestic polymeric MDI market is still bottoming out weakly, under the positive expectation, the downside space in the market outlook may be narrowed.