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VOLUME XXI
September 14, 2023
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April 1, 2022
WANHUA CHEMICAL(600309)SERIES 1：ON THE WAY TO BECOMING A GLOBAL CHEMICAL LEADER DRIVEN BY INNOVATION AND PROJECT INVESTMENT
类别：公司 机构：中国国际金融股份有限公司 研究员：Xiongwei JIA/Qichao ZHAO/Xiaofeng QIU/Di WU/Yaping XIAO/Yilin HOU 日期：2022-03-29
Action
We think Wanhua Chemical’s （Wanhua） recent share price correction presents opportunities for investment in the medium and long term. The company has made breakthroughs in technologically challenging production techniques and developed technologies on its own by leveraging its sound innovation system and sustained R&D spending. Meanwhile, Wanhua relies on heavy capex to further expand production capacity of its core products, build an integrated presence in the value chain, and achieve industrialized production of new products. These moves have helped Wanhua continue to expand its scale. We estimate that new projects that the firm has planned to build since end-2021 require capex of more than Rmb80bn. We calculate based on current product prices that these projects may generate revenue of over Rmb140bn after coming online. In our view, Wanhua’s mid- and long-term growth is highly visible thanks to its sustained R&D, innovation, and heavy capex for the coming years. We think Wanhua is on the way to becoming a global chemical leader.
Reasoning
We are not pessimistic about 2022 earnings from methylene diphenyl diisocyanate （MDI） and toluene diisocyanate （TDI）。 Wanhua further expands capacity to increase market share.
No new MDI or TDI facilities are scheduled to start production in 2022 across the globe. We expect MDI and TDI demand to continue to rise amid global economic growth. Europe accounts for 27% and 28% of global MDI and TDI capacity. We think rising natural gas prices in Europe could increase MDI and TDI costs, thus boosting Chinese exports of these two chemicals. Meanwhile, Wanhua’s polyurethane projects had a capacity utilization rate of 100% in 2021, and Covestro’s polyurethane output recovered gradually in 4Q21. We think leading firms have strong capabilities in balancing sales volume and prices.
We are not pessimistic about Wanhua’s 2022 earnings from MDI and TDI. Covestro expects global MDI demand to expand at a 6% CAGR in 2021-2026. We believe global new MDI capacity before 2026 should mainly come from Wanhua. We think Wanhua’s MDI projects in Ningbo and Fujian （2.2mtpa） are likely to come on stream in the coming years. We expect Wanhua to further expand its market share by leveraging its global lead in low cost levels.
Wanhua continues to expand and solidify its petrochemical business to pave the way for building an integrated presence along the value chain. In order to expand its presence to cover the full value chain and generate synergies, the company has built world-class propylene oxide （PO） and acrylic ester （AE） integrated facilities and a 1mtpa ethylene project （including the relevant chemicals）。 Earnings from this ethylene project declined recently due to higher crude oil prices. However, profit from the PO-AE integrated facilities remained decent thanks to favorable supply-demand conditions of acrylic acid and esters. Wanhua’s planned ethylene phase 2 project targets the high-end polyolefin market. The firm’s 400ktpa propylene oxide project and 480ktpa bisphenol A （BPA） project are also designed to produce polyether polyol and polycarbonate, in addition to propylene oxide and BPA. We think these petrochemical projects will likely further expand Wanhua’s coverage along the value chain.
A large number of technologically-challenging industrialization projects on new materials:
In the market for aliphatic diisocyanate （ADI） series products, Wanhua shifted from being a follower to a leader in 2021. Prices of these products increased notably as overseas facilities were hit by force majeure events. We think ADI will likely remain an important earnings source for Wanhua’s new material business.
We expect the firm’s 40,000t nylon 12 project to start production in 2-3Q22, thus helping Wanhua gain a foothold in the nylon 12 market that has long been dominated by foreign firms. Wanhua’s citral and derivatives project is slated to come online in 2023. We think the company’s aromatics business may launch a large number of new products by leveraging its citral product. Wanhua is ahead of peers in pushing for import substitution of POE, and its POE project is now in the industrialization stage.
In addition, the company also expanded its presence in cathode materials for lithium-ion batteries. We believe new-energy materials are likely to become an important growth driver for Wanhua in the next stage of development.
Financials and valuation
We leave our earnings forecasts unchanged. The stock is trading at 10.4x 2022 and 8.3x 2023e P/E. We maintain an OUTPERFORM rating and our TP of Rmb135, offering 73% upside and implying 18.0x 2022e and 14.5x 2023e P/E.
Risks
MDI and TDI prices lower than expected; earnings from petrochemical business decline significantly; progress in new projects slower than forecasted.
http://stock.finance.sina.com.cn/stock/go.php/vReport_Show/kind/search/rptid/701882322876/index.phtml
April 1, 2022
WANHUA CHEMICAL(600309)SERIES 1：ON THE WAY TO BECOMING A GLOBAL CHEMICAL LEADER DRIVEN BY INNOVATION AND PROJECT INVESTMENT
类别：公司 机构：中国国际金融股份有限公司 研究员：Xiongwei JIA/Qichao ZHAO/Xiaofeng QIU/Di WU/Yaping XIAO/Yilin HOU 日期：2022-03-29
Action
We think Wanhua Chemical’s （Wanhua） recent share price correction presents opportunities for investment in the medium and long term. The company has made breakthroughs in technologically challenging production techniques and developed technologies on its own by leveraging its sound innovation system and sustained R&D spending. Meanwhile, Wanhua relies on heavy capex to further expand production capacity of its core products, build an integrated presence in the value chain, and achieve industrialized production of new products. These moves have helped Wanhua continue to expand its scale. We estimate that new projects that the firm has planned to build since end-2021 require capex of more than Rmb80bn. We calculate based on current product prices that these projects may generate revenue of over Rmb140bn after coming online. In our view, Wanhua’s mid- and long-term growth is highly visible thanks to its sustained R&D, innovation, and heavy capex for the coming years. We think Wanhua is on the way to becoming a global chemical leader.
Reasoning
We are not pessimistic about 2022 earnings from methylene diphenyl diisocyanate （MDI） and toluene diisocyanate （TDI）。 Wanhua further expands capacity to increase market share.
No new MDI or TDI facilities are scheduled to start production in 2022 across the globe. We expect MDI and TDI demand to continue to rise amid global economic growth. Europe accounts for 27% and 28% of global MDI and TDI capacity. We think rising natural gas prices in Europe could increase MDI and TDI costs, thus boosting Chinese exports of these two chemicals. Meanwhile, Wanhua’s polyurethane projects had a capacity utilization rate of 100% in 2021, and Covestro’s polyurethane output recovered gradually in 4Q21. We think leading firms have strong capabilities in balancing sales volume and prices.
We are not pessimistic about Wanhua’s 2022 earnings from MDI and TDI. Covestro expects global MDI demand to expand at a 6% CAGR in 2021-2026. We believe global new MDI capacity before 2026 should mainly come from Wanhua. We think Wanhua’s MDI projects in Ningbo and Fujian （2.2mtpa） are likely to come on stream in the coming years. We expect Wanhua to further expand its market share by leveraging its global lead in low cost levels.
Wanhua continues to expand and solidify its petrochemical business to pave the way for building an integrated presence along the value chain. In order to expand its presence to cover the full value chain and generate synergies, the company has built world-class propylene oxide （PO） and acrylic ester （AE） integrated facilities and a 1mtpa ethylene project （including the relevant chemicals）。 Earnings from this ethylene project declined recently due to higher crude oil prices. However, profit from the PO-AE integrated facilities remained decent thanks to favorable supply-demand conditions of acrylic acid and esters. Wanhua’s planned ethylene phase 2 project targets the high-end polyolefin market. The firm’s 400ktpa propylene oxide project and 480ktpa bisphenol A （BPA） project are also designed to produce polyether polyol and polycarbonate, in addition to propylene oxide and BPA. We think these petrochemical projects will likely further expand Wanhua’s coverage along the value chain.
A large number of technologically-challenging industrialization projects on new materials:
In the market for aliphatic diisocyanate （ADI） series products, Wanhua shifted from being a follower to a leader in 2021. Prices of these products increased notably as overseas facilities were hit by force majeure events. We think ADI will likely remain an important earnings source for Wanhua’s new material business.
We expect the firm’s 40,000t nylon 12 project to start production in 2-3Q22, thus helping Wanhua gain a foothold in the nylon 12 market that has long been dominated by foreign firms. Wanhua’s citral and derivatives project is slated to come online in 2023. We think the company’s aromatics business may launch a large number of new products by leveraging its citral product. Wanhua is ahead of peers in pushing for import substitution of POE, and its POE project is now in the industrialization stage.
In addition, the company also expanded its presence in cathode materials for lithium-ion batteries. We believe new-energy materials are likely to become an important growth driver for Wanhua in the next stage of development.
Financials and valuation
We leave our earnings forecasts unchanged. The stock is trading at 10.4x 2022 and 8.3x 2023e P/E. We maintain an OUTPERFORM rating and our TP of Rmb135, offering 73% upside and implying 18.0x 2022e and 14.5x 2023e P/E.
Risks
MDI and TDI prices lower than expected; earnings from petrochemical business decline significantly; progress in new projects slower than forecasted.
http://stock.finance.sina.com.cn/stock/go.php/vReport_Show/kind/search/rptid/701882322876/index.phtml
April 1, 2022
Shelter-in-place in Adrian lifted; was issued after chemical release at Anderson Development
Brad HeinemanThe Daily Telegram
ADRIAN — Residents in much of Adrian’s east side were told to shelter in place for more than one hour early Wednesday morning because of a chemical release at the Anderson Development Co.
The shelter-in-place order was lifted at about 9 a.m. Wednesday, according to a news release from the city of Adrian.
The shelter order was issued at about 7:45 a.m. and affected people residing or working along and inside the boundaries of Center and Elm streets, East Siena Heights Drive, Parr Highway and East Beecher Street in Adrian. Residents in this area were informed to stay indoors and keep their home’s windows and doors closed throughout the duration of the order.
A release of a toluene diisocyanate vapors, also known by the acronym TDI, led the company to call the Adrian Fire Department, a news release from Anderson said. TDI is used in the production of a wide range of materials from couch cushions to rollerblade wheels. While finished products produced from TDI are common, the raw materials have some safety concerns, the release said.
“Exposure to TDI and related compounds is well known to result in skin and lung sensitization among workers and has been documented to cause asthma, lung damage, and in severe cases, fatal reactions,” according to the federal Environmental Protection Agency.
Operators at Anderson’s plant at 1415 E. Michigan St. were starting to make a batch of urethane at 4 a.m. Wednesday, the company’s news release said. Urethane is commonly used as a sealant, but it has several other uses because it is resistant to water, oil and oxidation.
“As they were charging materials, they identified that the temperature began increasing very quickly,” the company said. “The reactor heated up and the safety relief devices activated as designed. Some material carried over into the containment vessels, and some toluene diisocyanate vapors were released into the atmosphere.”
Emergency responders, which consisted of the Adrian fire and police departments and the Lenawee County hazmat team along with Anderson, “decided to be very cautious about the situation” and requested that people shelter in place for a half-mile around the plant.
Capt. A.J. Armstrong of the Adrian Fire Department said the responding agencies made sure those vapors that did get released into the air were not harmful.
“Luckily, nature helped us out and dissipated what was in the air,” Armstrong said. “We have resources and literature available that gives us an idea on how to deal with situations like this. First, we start with distances and meters and we monitor the quantity of the chemical that was released into the air. We were able to confirm the half-mile radius downwind was sufficient for issuing the order.”
The responding agencies, Armstrong said, had to wait for the “all clear” from Anderson Development when the parts in the plant were replaced and fully functional.
“Things could have gotten worse, but luckily they didn’t,” Armstrong said. “We were able to get a handle on things pretty quickly. If they did get worse, we would have used our knowledge of the situation to address any further concerns.”
Anderson Development said the emergency responders that assisted at the scene were able to handle the incident safely and addressed it without any injuries to employees or responders.
“The reactor is cooling and is stable at this point,” the release said. “Air monitoring has been conducted and confirmed that public health was never in jeopardy during this situation. The actions the team took were all out of an abundance of caution to protect the public.”
Investigation of the chemical release is being conducted, the release said, and is in its initial stages.
“We will continue our investigation to ensure that we understand what happened and how we can prevent anything like this from happening again,” the release said.
Craig Tanis, Lenawee County emergency management coordinator, said the shelter-in-place order issued by the city of Adrian was precautionary. The readings of the chemical released into the air were in the parts per billion, he said, which is well below the acceptable threshold.
“People were not in any real danger. It was just precautionary,” he said.
Through the county’s Lenawee Alerts system, 108 people who had registered addresses inside the half-mile radius zone were notified of the situation, Tanis said.
The alerts, he said, notify registered people of severe weather and other incidents happening throughout the county. To create an account, visit www.lenaweealerts.com. Residents should also make sure at least every six months that their account information is still viable and up to date, Tanis said, so that they will be able to receive instant notifications about emergencies right to their phones.
Anyone who believes they signed up for alerts but did not get a message before the countywide tornado siren test last week should log in to the website and check their contact information.
Messages can be sent by any combination of phone call, text message or email.
Because of the chemical release, The Daily Bread food pantry and soup kitchen, 302 S. Tecumseh St., posted on its social media page Wednesday morning it would be closed for the day. The shelter order included part of Siena Heights University’s campus on the south side of East Siena Heights Drive. An alert posted to SHU’s Facebook page said this area included the Erickson Enrollment Building, the softball and baseball fields, the fieldhouse and the parking lots.
The Lenawee County Fair & Event Grounds also shared on social media it would be temporarily closed to the public because of the shelter order.
Normal operations were able to resume following the lifting of the order.
Daily Telegram news editor David Panian contributed to this report.
April 1, 2022
Shelter-in-place in Adrian lifted; was issued after chemical release at Anderson Development
Brad HeinemanThe Daily Telegram
ADRIAN — Residents in much of Adrian’s east side were told to shelter in place for more than one hour early Wednesday morning because of a chemical release at the Anderson Development Co.
The shelter-in-place order was lifted at about 9 a.m. Wednesday, according to a news release from the city of Adrian.
The shelter order was issued at about 7:45 a.m. and affected people residing or working along and inside the boundaries of Center and Elm streets, East Siena Heights Drive, Parr Highway and East Beecher Street in Adrian. Residents in this area were informed to stay indoors and keep their home’s windows and doors closed throughout the duration of the order.
A release of a toluene diisocyanate vapors, also known by the acronym TDI, led the company to call the Adrian Fire Department, a news release from Anderson said. TDI is used in the production of a wide range of materials from couch cushions to rollerblade wheels. While finished products produced from TDI are common, the raw materials have some safety concerns, the release said.
“Exposure to TDI and related compounds is well known to result in skin and lung sensitization among workers and has been documented to cause asthma, lung damage, and in severe cases, fatal reactions,” according to the federal Environmental Protection Agency.
Operators at Anderson’s plant at 1415 E. Michigan St. were starting to make a batch of urethane at 4 a.m. Wednesday, the company’s news release said. Urethane is commonly used as a sealant, but it has several other uses because it is resistant to water, oil and oxidation.
“As they were charging materials, they identified that the temperature began increasing very quickly,” the company said. “The reactor heated up and the safety relief devices activated as designed. Some material carried over into the containment vessels, and some toluene diisocyanate vapors were released into the atmosphere.”
Emergency responders, which consisted of the Adrian fire and police departments and the Lenawee County hazmat team along with Anderson, “decided to be very cautious about the situation” and requested that people shelter in place for a half-mile around the plant.
Capt. A.J. Armstrong of the Adrian Fire Department said the responding agencies made sure those vapors that did get released into the air were not harmful.
“Luckily, nature helped us out and dissipated what was in the air,” Armstrong said. “We have resources and literature available that gives us an idea on how to deal with situations like this. First, we start with distances and meters and we monitor the quantity of the chemical that was released into the air. We were able to confirm the half-mile radius downwind was sufficient for issuing the order.”
The responding agencies, Armstrong said, had to wait for the “all clear” from Anderson Development when the parts in the plant were replaced and fully functional.
“Things could have gotten worse, but luckily they didn’t,” Armstrong said. “We were able to get a handle on things pretty quickly. If they did get worse, we would have used our knowledge of the situation to address any further concerns.”
Anderson Development said the emergency responders that assisted at the scene were able to handle the incident safely and addressed it without any injuries to employees or responders.
“The reactor is cooling and is stable at this point,” the release said. “Air monitoring has been conducted and confirmed that public health was never in jeopardy during this situation. The actions the team took were all out of an abundance of caution to protect the public.”
Investigation of the chemical release is being conducted, the release said, and is in its initial stages.
“We will continue our investigation to ensure that we understand what happened and how we can prevent anything like this from happening again,” the release said.
Craig Tanis, Lenawee County emergency management coordinator, said the shelter-in-place order issued by the city of Adrian was precautionary. The readings of the chemical released into the air were in the parts per billion, he said, which is well below the acceptable threshold.
“People were not in any real danger. It was just precautionary,” he said.
Through the county’s Lenawee Alerts system, 108 people who had registered addresses inside the half-mile radius zone were notified of the situation, Tanis said.
The alerts, he said, notify registered people of severe weather and other incidents happening throughout the county. To create an account, visit www.lenaweealerts.com. Residents should also make sure at least every six months that their account information is still viable and up to date, Tanis said, so that they will be able to receive instant notifications about emergencies right to their phones.
Anyone who believes they signed up for alerts but did not get a message before the countywide tornado siren test last week should log in to the website and check their contact information.
Messages can be sent by any combination of phone call, text message or email.
Because of the chemical release, The Daily Bread food pantry and soup kitchen, 302 S. Tecumseh St., posted on its social media page Wednesday morning it would be closed for the day. The shelter order included part of Siena Heights University’s campus on the south side of East Siena Heights Drive. An alert posted to SHU’s Facebook page said this area included the Erickson Enrollment Building, the softball and baseball fields, the fieldhouse and the parking lots.
The Lenawee County Fair & Event Grounds also shared on social media it would be temporarily closed to the public because of the shelter order.
Normal operations were able to resume following the lifting of the order.
Daily Telegram news editor David Panian contributed to this report.
April 1, 2022
German Chemical Giant Warns Of “Total Collapse” If Russian Gas Supply Cut
by Tyler DurdenFriday, Apr 01, 2022 – 05:44 AM
CEO of Germany’s multinational BASF SE, the world’s largest chemical producer, has warned that curbing or cutting off energy imports from Russia would bring into doubt the continued existence of small and medium-sized energy companies, and further would likely spiral Germany into its most “catastrophic” economic crisis going back to the end of World War 2.
Company CEO Martin Brudermuller issued the words in an interview with Frankfurter Allgemeine newspaper just ahead of German officials by midweek giving an “early warning” to industries and the population of possible natural gas shortages, as Russia appears ready to firmly hold to Putin’s recent declaration that “unfriendly countries” must settle energy payments in rubles, related to the Ukraine crisis and resultant Western sanctions.
According to Bloomberg he mused that while “Germany could be independent from Russia gas in four to five years” it remains that “LNG imports cannot be increased quickly enough to replace all Russian gas flows in the short term.”CEO of BASF Martin Brudermüller, file image
But in the meantime, Brudermuller described that “It’s not enough that we all turn down the heating by 2 degrees now” given that “Russia covers 55 percent of German natural gas consumption.” He emphasized that if Russian gas disappeared overnight, “many things would collapse here” – given that “we would have high levels of unemployment, and many companies would go bankrupt. This would lead to irreversible damage.” He continued:
“To put it bluntly: This could bring the German economy into its worst crisis since the end of the Second World War and destroy our prosperity. For many small and medium-sized companies in particular, it could mean the end. We can’t risk that!”
The dire warning of coming disaster in the event Russian gas is shut off came in response being questioned over whether it’s at all possible to abandon Russian energy.
Asserting that this issue is not “black and white” – and that the German economy stands on the brink of catastrophe, the BASF CEO said that if this standoff continues to escalate it will “open the eyes of many on both sides”…
Below is the question posed by the newspaper, and Brudermuller’s response:
And what if, for example, Putin’s demand for payment in rubles leads to an immediate stop in gas supplies?
“A delivery stop for a short time would perhaps open the eyes of many – on both sides. It would make clear the magnitude of the consequences. But if we don’t get any more Russian gas for a long time, then we really have a problem here in Germany. At BASF, we would have to scale back or completely shut down production at our largest site in Ludwigshafen if the supply fell significantly and permanently below 50 percent of our maximum natural gas requirement. Minister Habeck has already activated the early warning level of the gas emergency plan.”
Separate sources estimate that at Ludwigshafen alone this scenario would immediately lead to some 40,000 employees being possibly laid off, or at least put on short-time working hours.
He warned further in the interview that many Germans are currently greatly underestimating the consequences of what Russia shutting off the taps would mean… nothing less than a historic crisis:
“Many have misconceptions. I notice that in many of the conversations I have. People often make no connection at all between a boycott and their own job. As if our economy and our prosperity were set in stone.”
He explained that higher prices are already having a huge impact on the food supply given at this point BASF has been forced to reduce the production of ammonia for fertilizer production.
Brudermuller called this “a catastrophe and we will feel it even more clearly next year than this one. Because most of the fertilizers that the farmers need this year have already been bought. In 2023 there will be a shortage, and then the poor countries in particular, for example in Africa, will no longer be able to afford to buy basic foodstuffs.” In a very alarming statement and forewarning, he added: “There is a risk of famine.”
https://www.zerohedge.com/energy/basf-ceo-warns-germany-total-collapse-if-russian-gas-supply-cut
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