Asian Markets
July 28, 2022
Chinese Propylene Oxide Overview
Propylene oxide (PO) is the third largest propylene derivative after polypropylene and acrylonitrile. It can be made into polyurethane foam, it can also be made into fourth-generation detergent non-ionic surfactant, oil field demulsifier, pesticide emulsifier, etc. Derivatives of propylene oxide are widely used in furniture, home appliances, automobiles, construction, coatings and other industries. The production process of propylene oxide is mainly divided into direct oxidation method (HPPO), co-oxidation method (PO/SM or PO/TBA-MTBE) and chlorohydrin method (CHPO). The chlorohydrin process technology is relatively mature, the production process is relatively safe, and the investment required is small. With the relevant guidance documents promulgated by the government in 2011 and the state’s goal of “carbon peaking” and “carbon neutrality”, various administrative regions have implemented “dual control” measures. Under the overall environmental protection policy, the propylene oxide chlorohydrin method will generate more “three wastes”, and the cost of environmental protection treatment will be higher in the later stage. It is expected that with the continuous development of the industry, the co-oxidation method and the direct oxidation method will continue to improve. 
Since March 2020, the prices of propane and naphtha (hydrogenation) in my country have shown a continuous growth trend, mainly due to the rise in crude oil prices and the accumulation of demand for enterprises to resume work and production after the epidemic. On the whole, since 2020, upstream raw materials The increase in part led to the increase in the price of propylene oxide. The main products downstream of propylene oxide are polyether polyol, propylene glycol methyl ether, dimethyl carbonate, propylene glycol ether, etc. Polyether polyol is the largest downstream of propylene oxide, accounting for about 77.2% of the demand for propylene oxide. It is mainly used in the production of polyurethane foam. Its terminal downstream mainly includes white goods, building materials (mainly coatings), furniture and automobiles. In addition, the downstream product DMC (dimethyl carbonate), as the main lithium battery electrolyte solvent (transesterification method), benefits from the continuous growth of downstream new energy vehicle demand, and is expected to become a key demand growth point for propylene oxide. In 2021, as the domestic production capacity continues to be put into operation, the production capacity of propylene oxide in China continues to grow. In addition, the industry maintains a high degree of prosperity in the first half of the year, and the overall output rises significantly. Throughout the year, the output still increased by more than 30%. According to data, my country’s propylene oxide output in 2021 will be 3.46 million tons, a new high in recent years. 2023 is expected to be the year with the most new capacity additions, reaching 2.78 million tons. In the future, with the release of new production capacity, the supply of propylene oxide in my country will be able to meet the continuously growing demand, the import dependence is expected to decrease, and the supply and demand of propylene oxide market will tend to be relaxed. Future global market opportunities for propylene oxide in China In 2020, the Ministry of Commerce opened restrictions on the export of ECH for direct oxidation and co-oxidation processes; Weak domestic demand coupled with the expansion of production capacity, by the end of 2022, a total of nearly 2.5 million tons of new production capacity will be started. The import volume of propane will be reduced to less than 100,000 tons, and there will be an obvious turning point in the import and export next year)
If you have interesting about this material, please feel free to contact us.(chemical@echemi.com)
July 28, 2022
Chinese Propylene Oxide Overview
Propylene oxide (PO) is the third largest propylene derivative after polypropylene and acrylonitrile. It can be made into polyurethane foam, it can also be made into fourth-generation detergent non-ionic surfactant, oil field demulsifier, pesticide emulsifier, etc. Derivatives of propylene oxide are widely used in furniture, home appliances, automobiles, construction, coatings and other industries. The production process of propylene oxide is mainly divided into direct oxidation method (HPPO), co-oxidation method (PO/SM or PO/TBA-MTBE) and chlorohydrin method (CHPO). The chlorohydrin process technology is relatively mature, the production process is relatively safe, and the investment required is small. With the relevant guidance documents promulgated by the government in 2011 and the state’s goal of “carbon peaking” and “carbon neutrality”, various administrative regions have implemented “dual control” measures. Under the overall environmental protection policy, the propylene oxide chlorohydrin method will generate more “three wastes”, and the cost of environmental protection treatment will be higher in the later stage. It is expected that with the continuous development of the industry, the co-oxidation method and the direct oxidation method will continue to improve. Since March 2020, the prices of propane and naphtha (hydrogenation) in my country have shown a continuous growth trend, mainly due to the rise in crude oil prices and the accumulation of demand for enterprises to resume work and production after the epidemic. On the whole, since 2020, upstream raw materials The increase in part led to the increase in the price of propylene oxide. The main products downstream of propylene oxide are polyether polyol, propylene glycol methyl ether, dimethyl carbonate, propylene glycol ether, etc. Polyether polyol is the largest downstream of propylene oxide, accounting for about 77.2% of the demand for propylene oxide. It is mainly used in the production of polyurethane foam. Its terminal downstream mainly includes white goods, building materials (mainly coatings), furniture and automobiles. In addition, the downstream product DMC (dimethyl carbonate), as the main lithium battery electrolyte solvent (transesterification method), benefits from the continuous growth of downstream new energy vehicle demand, and is expected to become a key demand growth point for propylene oxide. In 2021, as the domestic production capacity continues to be put into operation, the production capacity of propylene oxide in China continues to grow. In addition, the industry maintains a high degree of prosperity in the first half of the year, and the overall output rises significantly. Throughout the year, the output still increased by more than 30%. According to data, my country’s propylene oxide output in 2021 will be 3.46 million tons, a new high in recent years. 2023 is expected to be the year with the most new capacity additions, reaching 2.78 million tons. In the future, with the release of new production capacity, the supply of propylene oxide in my country will be able to meet the continuously growing demand, the import dependence is expected to decrease, and the supply and demand of propylene oxide market will tend to be relaxed. Future global market opportunities for propylene oxide in China In 2020, the Ministry of Commerce opened restrictions on the export of ECH for direct oxidation and co-oxidation processes; Weak domestic demand coupled with the expansion of production capacity, by the end of 2022, a total of nearly 2.5 million tons of new production capacity will be started. The import volume of propane will be reduced to less than 100,000 tons, and there will be an obvious turning point in the import and export next year)
If you have interesting about this material, please feel free to contact us.(chemical@echemi.com)
May 16, 2022
Chinese MDI Update
The Aggregated MDI Market Fell First and Then Rose in April
ECHEMI 2022-05-06
At the beginning of the month, the domestic market price of aggregated MDI was 19,316 yuan/ton, and the price at the end of the month was 18,800 yuan/ton, a decrease of 2.67% during the month and a year-on-year decrease of 0.40%.
In April 2022, there are 41 commodities in the chemical sector that have increased month-on-month in the commodity price change list, of which 9 commodities have increased by more than 5%, accounting for 8.2% of the monitored commodities in this sector; the top 3 commodities are Formic acid (36.15%), caustic soda (13.35%), flake alkali (9.32%). A total of 66 commodities decreased month-on-month, and 29 commodities decreased by more than 5%, accounting for 26.4% of the monitored commodities in this sector; the top 3 products with a decrease were propylene glycol (-20.05%) and acetic acid (-18.39%). , Glycine (-16.77%). The average change this month was -1.87%.
At the beginning of the month, the domestic aggregated MDI market rose in a narrow range. One of the main reasons is that the logistics and transportation are severely restricted, the traffic at the expressway is congested, and the logistics and transportation costs are soaring. On the other hand, the spot supply in some areas is tight, especially in East China, and the quotations of mainstream traders are gradually rising.
In the first ten days of the month, the domestic aggregated MDI market declined in a narrow range. Traders offer scarce, more bearish outlook. The downstream sees the downturn in the market and increases the inquiring atmosphere, but transactions are rare.
In the middle of the month, the domestic aggregated MDI market continued to decline, mainly due to the low start of terminal enterprises and sluggish demand. Coupled with the high transportation costs, it is difficult to find a car, the regional control is strict, and the transportation is not smooth. Mainstream traders ship with them and talk about it one by one.
At the end of the month, the domestic aggregated MDI market stopped falling and rose, showing signs of recovery. Compared with East China, the logistics and transportation are relatively smooth, and some downstream customers who just need it are active in inquiries, and the demand has increased slightly. Traders are more reluctant to sell and negotiate. As the May Day holiday is approaching, some downstream companies have the intention to stock up, which has contributed to the recovery of the aggregated MDI price.
In terms of raw materials, pure benzene: styrene, caprolactam and other long-term losses, the price of pure benzene continues to rise and lack of motivation. However, new units such as Tianjin Dagu and Maoming Petrochemical styrene entered the market in May, and under the background of the gradual fading of the impact of the health incident and the recovery of the overall downstream consumption, the demand in May is expected to be stronger than that in April.
In terms of aniline, the aniline market fell sharply in April. The main reasons for the downturn of the aniline market are the obvious increase in the supply side, and the continued weakness of the demand side. The cost-side support remains strong, and it is difficult for aniline to fall below the “10,000 yuan throne”.
In terms of enterprises, Yantai Wanhua’s 1.1 million tons/year plant is operating normally; Ningbo Wanhua’s 1.2 million tons/year plant is operating normally; Shanghai Covestro’s 600,000 tons/year plant is operating normally; Shanghai Huntsman’s 380,000 tons/year plant is operating normally Normal operation; Shanghai BASF’s 220,000-ton/year plant is operating normally; Chongqing BASF’s 400,000-ton/year unit is operating normally; Tosoh Ruian’s 80,000-ton/year unit is operating normally.
Looking at the market outlook, it is still difficult for the market to fluctuate greatly after the May Day, and traders may lower their offers due to the large supply of goods at the beginning of the month. Analysts of the aggregated MDI of the business community predict that the domestic aggregated MDI market may enter the sorting stage.
May 16, 2022
Chinese MDI Update
The Aggregated MDI Market Fell First and Then Rose in April
ECHEMI 2022-05-06
At the beginning of the month, the domestic market price of aggregated MDI was 19,316 yuan/ton, and the price at the end of the month was 18,800 yuan/ton, a decrease of 2.67% during the month and a year-on-year decrease of 0.40%.
In April 2022, there are 41 commodities in the chemical sector that have increased month-on-month in the commodity price change list, of which 9 commodities have increased by more than 5%, accounting for 8.2% of the monitored commodities in this sector; the top 3 commodities are Formic acid (36.15%), caustic soda (13.35%), flake alkali (9.32%). A total of 66 commodities decreased month-on-month, and 29 commodities decreased by more than 5%, accounting for 26.4% of the monitored commodities in this sector; the top 3 products with a decrease were propylene glycol (-20.05%) and acetic acid (-18.39%). , Glycine (-16.77%). The average change this month was -1.87%.
At the beginning of the month, the domestic aggregated MDI market rose in a narrow range. One of the main reasons is that the logistics and transportation are severely restricted, the traffic at the expressway is congested, and the logistics and transportation costs are soaring. On the other hand, the spot supply in some areas is tight, especially in East China, and the quotations of mainstream traders are gradually rising.
In the first ten days of the month, the domestic aggregated MDI market declined in a narrow range. Traders offer scarce, more bearish outlook. The downstream sees the downturn in the market and increases the inquiring atmosphere, but transactions are rare.
In the middle of the month, the domestic aggregated MDI market continued to decline, mainly due to the low start of terminal enterprises and sluggish demand. Coupled with the high transportation costs, it is difficult to find a car, the regional control is strict, and the transportation is not smooth. Mainstream traders ship with them and talk about it one by one.
At the end of the month, the domestic aggregated MDI market stopped falling and rose, showing signs of recovery. Compared with East China, the logistics and transportation are relatively smooth, and some downstream customers who just need it are active in inquiries, and the demand has increased slightly. Traders are more reluctant to sell and negotiate. As the May Day holiday is approaching, some downstream companies have the intention to stock up, which has contributed to the recovery of the aggregated MDI price.
In terms of raw materials, pure benzene: styrene, caprolactam and other long-term losses, the price of pure benzene continues to rise and lack of motivation. However, new units such as Tianjin Dagu and Maoming Petrochemical styrene entered the market in May, and under the background of the gradual fading of the impact of the health incident and the recovery of the overall downstream consumption, the demand in May is expected to be stronger than that in April.
In terms of aniline, the aniline market fell sharply in April. The main reasons for the downturn of the aniline market are the obvious increase in the supply side, and the continued weakness of the demand side. The cost-side support remains strong, and it is difficult for aniline to fall below the “10,000 yuan throne”.
In terms of enterprises, Yantai Wanhua’s 1.1 million tons/year plant is operating normally; Ningbo Wanhua’s 1.2 million tons/year plant is operating normally; Shanghai Covestro’s 600,000 tons/year plant is operating normally; Shanghai Huntsman’s 380,000 tons/year plant is operating normally Normal operation; Shanghai BASF’s 220,000-ton/year plant is operating normally; Chongqing BASF’s 400,000-ton/year unit is operating normally; Tosoh Ruian’s 80,000-ton/year unit is operating normally.
Looking at the market outlook, it is still difficult for the market to fluctuate greatly after the May Day, and traders may lower their offers due to the large supply of goods at the beginning of the month. Analysts of the aggregated MDI of the business community predict that the domestic aggregated MDI market may enter the sorting stage.
April 1, 2022
Wanhua Overview
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
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