Overall fixed investment growth slows down, chemical industry production capacity concentrates to the leader

In the context of strict environmental supervision and oil price fluctuations, the chemical industry will face a reshuffle. After the industry renovation, the performance of each sub industry in the chemical industry is different, and the differentiation is large. Looking back on the price trend of chemical products, under the background of stable demand side, the change of supply side has become an important factor affecting the price. On the whole, the fixed asset investment in the chemical industry slowed down, and the construction in progress began to decline. From the perspective of capital expenditure and the speed of new production capacity, the last round of boom started to drive a new round of capital expenditure rise in the chemical industry in 2018, which also indicates a new round of capacity expansion.

Under the strict supervision of environmental protection, sub industries with limited supply are more popular

Strict supervision on safety and environmental protection of chemical industry will become the norm in the future. Under this trend, the industry leading target with integrated industrial chain and excellent environmental protection will continue to benefit, and the industry concentration will be further improved. Meanwhile, for the sub industries with limited supply, the prosperity will continue to maintain.

Affected by the "3.21" tianjiayi accident in Jiangsu Province, Jiangsu Province has further strengthened the rectification of the chemical industry in the province, becoming the key area of this year's supply side reform. As a major chemical industry province in China, the production capacity of many chemical enterprises in Jiangsu Province has been strongly impacted, which has become the main line of this year's chemical market. In recent years, the environmental improvement and supply side reform have gradually come to an end. At present, chemical enterprises in Yancheng and Lianyungang (3.690, - 0.02, - 0.54%) have started to resume production.

After the industry renovation, the performance of various sub industries in the chemical industry is different. From the perspective of operating revenue, the financial data up to the third quarter of 2019 shows that the operating revenue of chlor alkali, potash fertilizer, polyester and paint plate has increased by more than 10%, but the compound fertilizer plate has decreased by 24.27%; From the perspective of return to parent net profit, potash fertilizer and organosilicon plate increased by 67.05% and 56.54% respectively, while nitrogen fertilizer, plastic products and soda ash all decreased by more than 50%.

From the perspective of sub industry classification, Shenwan chemical industry is divided into six secondary sub industries, namely petrochemical industry, chemical raw materials, chemical products, chemical fiber, plastics and rubber. Among them, chemical products and chemical fiber have 14 and 5 tertiary sub industries respectively.

Supply side changes affect price trends

Looking back on the price trend of chemical products, under the background of stable demand side, the change of supply side has become an important factor affecting the price. For example, acetic acid, as an important organic chemical product, is mainly used in PTA, acetate, vinyl acetate and other fields in the downstream. Since 2017, benefiting from the improvement of marginal demand under zero production increase in recent years, combined with the influence of force majeure and frequent shutdown and maintenance of large-scale acetic acid plants at home and abroad, the price of acetic acid has risen sharply, and the industry has returned to high prosperity.

In 2018, acetic acid ushered in a prosperous year, and its price soared to a ten-year high. In 2018, the average price of acetic acid was 4540 yuan / ton, 50% higher than that of 3032 yuan / ton in 2017. In terms of the price difference between acetic acid and coal, the price difference between acetic acid and coal reached 3899 yuan / ton in 2018, which was nearly 1440 yuan / ton compared with 2443 yuan / ton in 2017.

On the whole, the fixed asset investment in the chemical industry slowed down, and the construction in progress began to fall. From the perspective of capital expenditure and the speed of new production capacity, the last round of boom started to drive a new round of capital expenditure in the chemical industry in 2018. 2018-2020 is the main time point of this round of expenditure, and the major direction of expenditure is large refining. At present, this round of capital expenditure has begun to show a significant year-on-year decline.

The growth rate of fixed asset investment in most chemical products remained low, and the industry with the worst overcapacity ushered in the biggest marginal improvement. In the context of the weakening of the industry, safety and environmental protection are increasing. It is expected that the growth rate of fixed asset investment in the chemical industry will remain low in the future.

Concentration of production capacity to head Enterprises

In terms of industry segments, in the first half of 2019, the cumulative growth rate of fixed asset investment in petroleum processing, coking and nuclear fuel processing industry was 6.90%, the cumulative growth rate of fixed asset investment in chemical raw materials and chemical products manufacturing industry was 9.30%, the cumulative growth rate of fixed asset investment in chemical fiber manufacturing industry was - 10.60%, and the cumulative growth rate of fixed asset investment in rubber and plastic manufacturing industry was 5.60%.

Among them, the investment in fixed assets of chemical fiber has fallen sharply, and the growth rate of investment in fixed assets of chemical raw materials and products, rubber and plastic products has begun to slow down. From the perspective of industry inventory, the data as of the end of December 2019 shows that the inventory of chemical raw materials and products is close to the low point of 2016, and the inventory of chemical fiber is close to the low point of nearly five years.

From the perspective of industrial capital expenditure, both the petrochemical industry and the basic chemical industry, the growth rate of construction in progress and fixed assets fluctuated greatly in recent quarters. On the one hand, it was affected by the time point data, on the other hand, it was caused by the large fluctuation of some companies. According to the statistics of Huachuang chemical team, in order to smooth out the above effects, the growth rate of construction in progress in petrochemical industry turned to be positive in 2018q2, and that of basic chemical industry turned to be positive in 2018q1.

Among them, the new projects are mainly concentrated in the leading enterprises, the industry concentration is improved, and the control of leading enterprises is strengthened. As of the semi annual report of 2019, the year-on-year growth rate of capital expenditure of Wanhua chemical (42.530, 0.10, 0.24%) was 108.9%, and that of Hengli Petrochemical (13.180, 0.06, 0.46%) was 57.7%.

In the past few years, under the background of supply side reform, the concentration of the chemical industry has shown an obvious upward trend, and the new production capacity of the industry is mainly concentrated in the head enterprises. According to the calculation of Huasheng securities, taking the listed companies in the industry as an example, the top 10% of chemical companies account for 40% of the income of all listed chemical companies, and the profits and construction in progress are more than 50%. These two figures are 10 percentage points higher than five years ago.

According to the calculation of Huasheng securities, the roe of Q3 industry in chemical industry in 2019 decreased by 23.17% to 6.9% year on year. The gross profit rate of the industry was 18.34%, a year-on-year decrease of 4.3pct; the net profit rate of the industry was 6.96%, a year-on-year decrease of 1.98 PCT.