Behind The Achievements Of Chemical Enterprises: Environmental Protection And Production Restriction Become Important Drivers.

Since the beginning of this year, the A share market has fallen sharply. Up to now (July 11th), the Shanghai Composite Index has dropped by 16.01%, and the Shenzhen stock index has fallen by 18.27%.

However, in the context of the sharp fall in the index, the share price of chemical enterprises has hardly declined, and some have even risen. Since the beginning of this year (July 11th), the stock price of Luxi Chemical industry has risen by 12.22%; Hua Lu Heng Sheng has risen by 20.29%; Hengli stock has gained 20.84%.

Why does the share price of chemical companies decline or even rise sharply?

Chemical enterprise performance to better: Luxi Chemical net profit rose more than two times

Recently, Luxi Chemical Industry issued a notice of performance, the first half of 2018, the company's net profit was 1 billion 680 million - 1 billion 730 million, compared with 551 million in the same period last year, surged 205% - 214%.

Not only Luxi Chemical Industry, Yun Tian Hua announced the performance notice also showed that in the first half of this year, the company's profit was about 65 million, compared with a loss of 344 million in the same period last year. In addition, Hua Lu Heng Sheng expects that as at the end of June 2018, the company's net profit will be 1 billion 646 million - 1 billion 696 million, up 202% - 211%.

In fact, the performance of chemical enterprises appeared a good trend last year. Take Luxi Chemical Industry as an example. In that year, the total revenue of the company was 15 billion 762 million, an increase of 43.96% over the same period, with a net profit of 1 billion 950 million, an increase of 671.95% over the same period last year, and net profit also hit a record high.

It is noteworthy that in 2016, Luxi Chemical Industry performance is still in a doldrums; in that year, the company not only saw a decline in net profit but also a rare decline in revenue. In fact, in 2016, the chemical industry as a whole was in a doldrums.

Why has the situation reversed after just one year?

The price of chemical products has risen sharply, and environmental protection has become an important driver.

Luxi Chemical Industry announced in its pre performance announcement that the chemical industry has been improving continuously due to the stricter policy of national security and environmental protection and the intensified efforts to eliminate small and scattered polluting enterprises.

The most important performance of the chemical industry is the rising price of chemical products. Take octanol produced by Luxi Chemical Company as an example, the latest (July 12th) factory price of octanol is 8650 yuan / ton, which is up to 80.2% compared with the low point in 2016.

The continuous strengthening of environmental supervision is an important promoter of the price increase of chemical products. Societe Generale Securities research reported that the main provinces of chemical products production are located in the list of key points of environmental supervision. Some SMEs are closed down because of environmental protection, and supply and contraction drive prices up sharply.

Shen Wan Yuan Yuan research reported that in the field of basic chemical industry, after the previous round of adjustment of the overall downturn of the industry, the basic chemical products have achieved the current cyclical clearing of production capacity, and the continued pressure on environmental protection policy and the continuous reform of supply side reform will lead to a significant slowdown in the new capacity growth. The research report believes that in the next three years, the domestic environmental policy and capacity adjustment will not be relaxed, so the cycle of chemical products will continue for a long time.

In fact, enterprises that shut down factories due to environmental protection are still continuing. According to the exclusive report of the end of June, the general office of Jiangsu issued the notice on the renovation plan of the coastal chemical industrial park (concentration area), which requires all chemical production enterprises in the chemical industrial parks and parks in the three cities of the coastal areas of Nantong, Lianyungang and Yancheng to be renovate. In addition, Shandong intends to plan only to retain 155 chemical parks, 44 rectification and cancellation, and requires chemical enterprises in key sensitive areas to enter the park before the end of 2018.

Industrial Development and environmental dilemma: PX's dependence on foreign trade has reached a new high.

Under the high pressure of environmental protection, the price of chemical products has been rising due to the suppression of supply. However, the output of some important products in the chemical industry has also been suppressed, which leads to an increase in import volume and external dependence. Take polycarbonate as an example, polycarbonate (PC) is one of the mainstream chemical products. In 2016, global consumption was 4 million 330 thousand tons. Polycarbonate was widely used in electrical, electronic, automotive, optical and other fields. However, China's polycarbonate is mainly dependent on imports.

According to Shen Wan Hongyuan Research Report, the consumption of polycarbonate in China in 2017 was about 1 million 800 thousand tons, while the output was only 630 thousand tons, and the dependence on imports reached 65%. In addition, the output of polycarbonate in China is mostly produced by foreign capital or joint ventures.

Not only polycarbonate, another important chemical industry. raw material China also relies heavily on imports. P-xylene, also known as PX, is one of the most important raw materials in chemical production. At present, China is the largest consumer of PX. However, due to various reasons, China's PX production is slow to achieve self-sufficiency. In 2017, for example, China's PX demand was up to 28 million 500 thousand tons in the year, but the output was only 10 million 200 thousand tons. Against this background, China has to import large quantities of PX. In 2017, the import volume was 14 million tons, up 13.26% over the same period last year.

What is more noteworthy is that PX's external dependence has increased. In 2011, PX's external dependence was 43%, and in 2017, this figure rose to 58%.

Under the promotion of environmental protection and limited production, the domestic chemical industry industry Performance is rising steadily. However, the phenomenon of dependence on imports of core chemical products has cast a shadow over the development of China's chemical industry.