Chemical giants collectively raise prices, December raw material market carnival revival: false bull market, supply and demand mismatch Chemical giants collectively raise prices, December raw material market carnival revival: false bull market, supply and demand mismatch Depth analysis of industrial game and industrial game depth analysis

1. The core characteristics of this round of chemical price increases: abnormal "off-season super market" 1. The core characteristics of this round of chemical price increases: abnormal "off-season super market"

The chemical raw materials collectively rose from the second half to the end of 2016, which is a typical chemical industry chemical raw materials collectively rose from the second half to the end of 2016. It is a typical non-fundamental-driven, structural pseudo-bull market non-fundamental-driven, structural pseudo-bull market in the chemical industry, completely breaking the seasonal operation law of traditional chemical products. The fourth quarter of the conventional chemical market is the off-season for downstream finished products, and the end point coatings, plastics, resins, and rubber and plastic products continue to fall. The demand side should weaken and the price of raw materials is under pressure. However, in 2016, the industry walked out of the abnormal market of "off-season surge, off-season continuous rise, and off-season exceeding expectations"., completely breaking the seasonal operation law of traditional chemical products. The fourth quarter of the conventional chemical market is the off-season for downstream finished products. At the end point, the operating rate of coatings, plastics, resins, and rubber and plastic products continued to decline. The demand side should weaken and the price of raw materials should be under pressure. However, in 2016, the industry came out of the abnormal market of "off-season soaring, off-season rising, off-season exceeding expectations".

This round of price increases presents significant echelon conduction characteristics: upstream energy ore first, basic chemical relay, fine chemical follow-up, and end point coating and plastic powder finishing. From source raw materials such as titanium concentrate, coal, and crude oil, to basic raw materials such as acrylic acid and esters, ethanolamine, ketones, acetates, and then to fine intermediates such as resins, additives, and polyols, and finally conducted to end point products such as powder coatings and plastic powders, forming a closed-loop price increase chain of the whole industry chain. And the main body of price increases presents this round of price increases with significant echelon conduction characteristics: upstream energy ore first, basic chemical relay, fine chemical follow-up, and end point coating and plastic powder finishing. From titanium concentrate, coal, crude oil and other source raw materials, to acrylic acid and esters, ethanolamine, ketones, acetate and other basic raw materials, and then to resins, additives, polyols and other fine intermediates, and finally conducted to powder coatings, plastic powder and other end point products, forming a closed-loop price increase chain of the whole industry chain. And the main body of price increases presents the international giants leading, domestic leaders rising, small and medium-sized manufacturers rising international giants leading, domestic leaders rising, small and medium-sized manufacturers rising pattern, BASF, Wacker, Mitsubishi Rayon, Evonik and other overseas companies took the lead in issuing global price adjustment letters, locking in the tone of industry price increases, and domestic companies followed up to amplify the market increase. BASF, WACKER, Mitsubishi Rayon, Evonik and other overseas companies took the lead in issuing global price adjustment letters, locking in the tone of industry price increases, and domestic companies followed up to amplify the market increase.

At the same time, there is a strong structural differentiation in this round of the market: titanium dioxide, TDI, acrylate and other categories have doubled or even multiplied, which is a surge beyond expectations; resins, additives, acetate, ethanolamine and other categories have steadily increased, and the increase has been steady; and the price increase of rutile-type industrial-grade raw materials is much stronger than that of low-end anatase-type and general-purpose products, and the premium ability of high-end industrial raw materials is fully highlighted, fully reflecting the structural supply and demand imbalance characteristics of the industry. At the same time, there is a strong structural differentiation in this round of market: titanium dioxide, TDI, acrylate and other categories have doubled or even multiplied, which is a surge beyond expectations; resins, additives, acetate, ethanolamine and other categories have steadily followed suit, with steady growth; and rutile-type industrial-grade raw materials have far stronger price increases than low-end anatase and general-purpose products, and the premium ability of high-end industrial raw materials has been fully highlighted, fully reflecting the structural supply and demand imbalance characteristics of the industry.

Second, the underlying driving logic of the market: multiple bullish resonances, not a simple market recovery Second, the underlying driving logic of the market: multiple bullish resonances, not a simple market recovery

The chemical price increase at the end of 2016 was not a real bull market in the industry's capacity clearing and demand recovery, but a real bull market in the chemical industry's capacity clearing and demand recovery at the end of 2016, but a domestic supply-side reform, global plant accident disturbance, energy commodity rebound, currency and exchange rate fluctuations, regional control and production restriction Domestic supply-side reform, global plant accident disturbance, energy commodity rebound, currency and exchange rate fluctuations, regional control and production restriction The staging market of the five core factors is also a typical mismatch market of "strong supply-side drive and weak demand-side support" in the chemical industry. The stacking of the five core factors is also a typical mismatch market of "strong supply-side drive and weak demand-side support" in the chemical industry.

1. Domestic policy side: environmental inspection + summit control, short-term supply hard contraction 1. Domestic policy side: environmental inspection + summit control, short-term supply hard contraction

2016 is the first year of supply-side structural reform and normalized control of environmental protection in the domestic chemical industry. Since July, the central ecological and environmental protection inspectors have fully landed in eight provinces, covering the domestic core chemical agglomeration areas. A large number of small and medium-sized scattered and polluted chemical enterprises and non-standard production capacity have directly stopped production, limited production, and rectified. Low-end invalid production capacity has been cleared quickly, and the market spot circulation has tightened in an instant. Superimposed production control and logistics restrictions in East China's core chemical industry during the mid-year G20 summit to further compress effective supply and form a phased spot gap, laying the core foundation for the price surge in the second half of the year. 2016 is the first year of supply-side structural reform and normalized control of environmental protection in the domestic chemical industry. Since July, the central ecological and environmental protection inspectors have fully landed in the eight provinces, covering the domestic core chemical agglomeration areas. A large number of small and medium-sized scattered chemical enterprises and non-standard production capacity have directly stopped production, limited production, and rectified. Low-end invalid production capacity has been cleared quickly, and the market spot circulation has tightened instantly. Superimpose the production control and logistics restrictions in the East China core chemical zone during the mid-year G20 summit to further compress the effective supply and form a phased spot gap, laying the core foundation for the price increase in the second half of the year.

Different from the conventional capacity elimination, this round of control has the characteristics of sudden, global, and short-term rigidity. The downstream stocking inertia is sufficient, the upstream supply is rapidly contracting, and the supply and demand are instantaneously unbalanced, directly breaking the stable price system in the first half of the year and opening a continuous price increase channel. At the same time, the coal industry implemented the 276-day production restriction policy. Domestic coal prices soared by more than 66% during the year, and the production cost of coal-to-chemical products rose comprehensively, forming a rigid cost support. Different from the conventional capacity elimination, this round of control has the characteristics of sudden, global, and short-term rigidity. The downstream stocking inertia is sufficient, the upstream supply is rapidly contracting, and the supply and demand are instantaneously unbalanced, directly breaking the stable price system At the same time, the coal industry implemented a 276-day production limit policy, causing domestic coal prices to skyrocket by more than 66% during the year. The production costs of coal-to-chemicals rose comprehensively, forming a rigid cost support.

2. Global supply side: overseas device accidents occur frequently, and the global supply gap is transmitted to domestic 2. Global supply side: overseas device accidents occur frequently, and the global supply gap is transmitted to domestic

In the second half of 2016, force majeure broke out in overseas chemical plants, forming a global supply shortage. Covestro, Solvay and other leading European companies such as MDI, TDI, and hexamethylenediamine core plants suddenly failed to stop, and the supply of overseas high-end chemical intermediates dropped sharply. Global supply was tight, and external prices rose. BASF, Oxea, Eastman and other giants took the opportunity to start global price adjustments, covering ethanolamine, acetate, ketones, polymers and other categories. Overseas price increases were quickly transmitted to China through the import and export trade chain, forming a pattern of internal and external price increases. In the second half of 2016, force majeure broke out in overseas chemical plants, forming a global supply shortage. Covestro, Solvay and other leading European companies' MDI, TDI, and hexamethylenediamine core devices have suddenly failed to stop, the supply of overseas high-end chemical intermediates has dropped sharply, the global supply is tight, and the price of external disks has risen. BASF, Oxea, Eastman and other giants took the opportunity to start global price adjustments, covering ethanolamine, acetate, ketones, polymers and other categories. Overseas price increases were quickly transmitted to China through the import and export trade chain, forming a linkage between internal and external disks.

It is worth noting that the failures of overseas installations are all short-term emergencies, not long-term production capacity withdrawal. They belong to the typical phased disturbance bullish, without the fundamental logic of long-term support for the market, and also lay the groundwork for the subsequent rapid decline in the market. It is worth noting that the failures of overseas installations are all short-term emergencies, not long-term production capacity withdrawal. They belong to the typical phased disturbance bullish, without the fundamental logic of long-term support for the market, and also lay the groundwork for the subsequent rapid decline in the market.

3. Commodities and macros: energy rebound + exchange rate depreciation, building a cost base 3. Commodities and macros: energy rebound + exchange rate depreciation, building a cost base

In 2016, international crude oil prices rebounded sharply during the year. Brent crude oil rose by more than 50% annually, completely breaking away from the previous low price range and providing strong cost support for all types of petroleum-based chemicals. At the same time, the RMB continued to depreciate during the year, the import cost of chemical raw materials rose, and the price of imported sources rose, forcing domestic spot prices to rise synchronously, further solidifying the foundation for price increases in the industry. Superimposed on the loose market liquidity during the year, hot money poured into the chemical cycle category, amplifying the price increase and market sentiment. In 2016, international crude oil prices rebounded sharply during the year. Brent crude oil rose by more than 50% annually, completely breaking away from the previous low price range and providing strong cost support for all types of petroleum-based chemicals. At the same time, the RMB continued to depreciate during the year, the import cost of chemical raw materials rose, and the price of imported sources rose, forcing domestic spot prices to rise synchronously, further solidifying the foundation for industry price increases. Superimposed on the loose market liquidity during the year, hot money poured into the chemical cycle category, amplifying the price increase and market sentiment.

III. Differentiated professional logic for price increases in typical categories III. Differentiated professional logic for price increases in typical categories

1. Acrylic acid and ester: accident catalysis + rigid demand replenishment, emotional pull up significantly 1. Acrylic acid and ester: accident catalysis + rigid demand replenishment, emotional pull up significantly

Acrylic acid and esters are the core rigid demand raw materials for coatings, emulsions, and adhesives, and the downstream rigid demand is stable. In October, the explosion of BASF devices became the market fuse, directly breaking the regional supply and demand balance. The East China market rose rapidly in the short term, with an increase of more than 18% in two months. The core logic of the price increase of this category is that acrylic acid and esters are the core rigid demand raw materials for coatings, emulsions, and adhesives, and the downstream rigid demand is stable. In October, the explosion of BASF devices became the market fuse, directly breaking the regional supply and demand balance. The East China market rose rapidly in the short term, with an increase of more than 18% in two months. The core logic of this category's price increase is emergency disturbance + market concentration replenishment emergency disturbance + market concentration replenishment , which belongs to the dual drive of emotion and spot, and its own industry does not have a long-term capacity gap, and the market hype attribute is strong., belongs to the dual drive of emotion and spot, and its own industry does not have a long-term capacity gap, and the market hype attribute is strong.

2. Titanium dioxide: raw material force + faucet control panel, out of the super market in the off-season 2. Titanium dioxide: raw material force + faucet control panel, out of the super market in the off-season

The price increase of titanium dioxide in this round has extremely strong industrial chain conductivity. The upstream titanium concentrate rose by as much as 67% during the year, forming a rigid cost pressure. At the same time, Baililian and Longpython head enterprises integrated market resources, and the bargaining power of the leaders was greatly improved. They took the initiative to lead the price increase. 21 companies concentrated and rose to form an industry consensus. The biggest feature of the market is that the price increase of titanium dioxide in this round has extremely strong industrial chain conductivity. The upstream titanium concentrate rose by as much as 67% during the year, forming a rigid cost pressure. At the same time, Baililian and Longpython head enterprises integrated market resources, and the bargaining power of the leaders was greatly improved. They took the initiative to lead the price increase. 21 companies concentrated and rose to form an industry consensus. The biggest feature of the market is that the demand for high-end coatings and plastics is stronger, while the demand for low-end products is weaker and the growth rate is lagging behind, which fully reflects the structural differentiation logic., reflecting the tougher rigid demand in the industrial high-end coatings, rubber and plastics fields, while the demand for low-end products is weaker and the growth rate is lagging behind, fully reflecting the structural differentiation logic.

3. Ethanolamine, acetate, fine additives: international giants pricing dominance, passive follow-up 3. Ethanolamine, acetate, fine additives: international giants pricing dominance, passive follow-up

The fine chemical category represented by BASF ethanolamine, Oxea acetate, bell chemical additives, and Evonik polymers has sufficient domestic production capacity, sufficient market competition, and no obvious supply and demand gap. This round of price increases is entirely the fine chemical category represented by BASF ethanolamine, Oxea acetate, bell chemical additives, and Evonik polymers. It has sufficient domestic production capacity, sufficient market competition, and no obvious supply and demand gap. This round of price increases is entirely the result of the global unified pricing of overseas giants, the global unified pricing of overseas giants forced by external disk, and the global unified pricing of overseas giants forced by external disk forced by internal disk. It is an input-type price increase, with no substantial improvement in its own fundamentals, the weakest sustainability of price increases, and obvious characteristics of market bubbles. As a result, it is an input-type price increase, with no substantial improvement in its own fundamentals, the weakest sustainability of price increases, and obvious characteristics of market bubbles.

4. The whole chain of powder coatings: cost-forced passive price increase 4. The whole chain of powder coatings: cost-forced passive price increase

Powder coatings belong to the end point processing category and have no independent pricing power. The price of upstream polyester resin, titanium dioxide, curing agent, and epoxy resin has increased sharply in the whole chain, and the cost pressure of end point enterprises has increased sharply. Only passive price adjustment can pass on the cost. From Qingtian Materials, Zhanxin to AkzoNobel and Wuyi Plastic Powder, the price adjustment of the whole industry belongs to the end point processing category of powder coatings and has no independent pricing power. Upstream polyester resin, titanium dioxide, curing agent, and epoxy resin have increased in the whole chain, and the cost pressure of end point enterprises has increased sharply. Only passive price adjustment can pass on the cost. From Qingtian Materials, Zhanxin to AkzoNobel and Wuyi Plastic Powder, the price adjustment of the whole industry belongs to the cost conduction type passive follow-up cost conduction type passive follow-up , no profit premium, only for capital preservation operation, and there is an essential difference from the active price increase of upstream raw materials., No profit premium, only for capital preservation operation, and there is an essential difference from the active price increase of upstream raw materials.

4. Industry core disputes: the chaos of price increases and industrial games in the context of overcapacity 4. Industry core disputes: the chaos of price increases and industrial games in the context of overcapacity

The biggest contradiction in the chemical market at the end of 2016 is: The biggest contradiction in the chemical market at the end of 2016 is: The overall overcapacity of the whole industry, the end point demand has not recovered, but out of the structural super bull market The overall overcapacity of the whole industry, the end point demand has not recovered, but out of the structural super bull market , which is also the core root of the collective questioning of the downstream industry and the initiation of anti-monopoly applications. From the perspective of industrial fundamentals, the domestic chemical industry was still in the cycle of overcapacity at that time. Most of the bulk chemical products started at a low rate, the end point real estate and manufacturing demand picked up steadily, and there was no explosive growth, which was completely unable to support the price surge of several times., which is also the core root cause of the collective questioning of the downstream From the perspective of industrial fundamentals, at that time, the domestic chemical industry was still in the cycle of overcapacity, most of the bulk chemicals started at a low rate, end point real estate, and manufacturing demand picked up steadily.

With TDI as a typical representative, the price skyrocketed from 10,000 yuan/ton to 50,000 yuan/ton during the year, an increase of nearly 5 times, completely out of cost and demand fundamentals, belonging to the typical TDI as a typical representative, the price skyrocketed from 10,000 yuan/ton to 50,000 yuan/ton during the year, an increase of nearly 5 times, completely out of cost and demand fundamentals, belonging to the typical industry group price, spot sale, capital speculation, emotional amplification Industry group price, spot sale, capital speculation, emotional amplification market chaos. The upstream manufacturers take advantage of the short-term supply gap, actively control the quantity, reluctantly sell, and close the order, artificially create a shortage of spot goods, superimpose traders' hoarding speculation, and further amplify the market bubble, resulting in a serious imbalance of upstream and downstream profits, and a large area of downstream processing enterprises are under pressure and profits are squeezed. Market chaos. The upstream manufacturers take advantage of the short-term supply gap, actively control the quantity, reluctantly sell, and close the order, artificially create a shortage of spot goods, superimpose traders' hoarding speculation, and further amplify the market bubble, resulting in a serious imbalance of upstream and downstream profits, and a large area of downstream processing enterprises is under pressure and profits are squeezed.