Multiple chemical raw material prices are falling, and terminal product profits are expected to increase

Since the beginning of this year, the prosperity of the chemical industry has continued to decline, and various chemical products have experienced significant fluctuations within the year. Recently, under the influence of multiple factors such as lower crude oil prices and downstream maintenance, weak cost support has led to a significant decline in chemical prices. Against this backdrop, downstream terminal products have entered a period of profit growth.

According to statistics, among various chemicals in recent times, the overall price decline of polyethylene and polypropylene products downstream of olefins has been relatively small, and the product price difference has remained stable; EVA prices have slightly decreased, and the product price difference has widened; The price of styrene has also significantly declined. In addition, there are multiple varieties whose prices have declined due to demand, such as pure benzene, which has experienced a significant drop in prices due to the shutdown and maintenance of downstream styrene, phenolic ketones, and other equipment; Due to the winter season in both the north and south of China, downstream demand for polycarbonate has gradually shifted to the traditional off-season, with weak support on the demand side and a decline in product prices.

The decrease in prices of basic chemical raw materials has created a positive impact on the profit increase of end products, with industries such as tires, compound fertilizers, and pesticide formulations showing increasing enthusiasm.

Recently, pesticide formulation company Novozymes stated in an institutional survey that the significant decrease in raw material prices in 2023 has forced channels to reduce inventory. Currently, channel inventory has significantly decreased and it is expected to enter a restocking state in the future. The relevant person in charge of the company stated, "Due to the low prices of upstream raw materials this year, procurement costs have significantly decreased, and the gross profit margin of products is expected to increase by 2% -3% next year."

Faced with the current raw material market industry, new material enterprise Ruitai New Materials recently stated that the company continues to track and conduct in-depth analysis of major raw material markets, regularly formulates procurement plans, and adjusts procurement scales during peak and valley periods to reduce the adverse effects of raw material price fluctuations. "The decline in raw material prices will to some extent reduce the cost of the company's related products; at the same time, the company will conduct frequent and small batch purchases, trying to enter and exit as quickly as possible."

The performance of the tire industry is also quite evident. Since the second half of this year, the tire industry has ushered in a hot atmosphere with multiple boosts such as a decline in raw material costs, increased demand, and reduced shipping costs.

Since December, several tire companies such as Linglong Tire and Senqilin have repeatedly stated to the outside world that their production has entered a state of supply shortage.

Linglong Tire stated on the interactive platform that the company's current semi steel orders are booming, and orders still exceed production capacity; Sen Qilin stated that the company's production and sales were booming in October and November, with continuous full production and operation of semi steel tires and continuous growth of production and sales of all steel tires. The business situation is stable and good, and based on communication with customers, it is expected that orders will remain full next year; Sailun Tire stated that the company's domestic and foreign factories are currently operating normally, with high order volumes and operating rates. The company is confident that orders and operating rates will continue to remain high next year.

Since October, the prices of major upstream raw materials for tires have begun to decline. Data shows that as of December 7th, the main rubber futures price was 13355 yuan per ton. In less than two months, the rubber futures price has decreased by nearly 1700 yuan per ton. During the same period, the price of carbon black experienced a greater decline. According to data from Zhuochuang Information, the month on month decline of carbon black was 14.67% and 10.02%, respectively. In addition, raw materials such as antioxidants have also experienced varying degrees of decline.

Longzhong Information believes that in the future, the raw material level may continue to weaken, and it is expected that the carbon black market may still decline in the future. The decline in raw material prices and the decline in tire raw material costs have led to an increase in corporate profits,

The current prosperity of the chemical industry continues to be low. Securities analysts believe that as the chemical industry as a whole is in a bottom oscillation stage, the downward risk of the chemical industry has been greatly alleviated, and the prosperity is expected to hit the bottom and rebound next year.

Galaxy Securities believes that against the backdrop of weak cost support, chemical prices have significantly declined. Looking ahead to 2024, the focus of oil prices may slightly decline, and the cost side will no longer be the key factor affecting industry profitability; Under the trend of repairing resonance and actively replenishing inventory both domestically and internationally, the overall prosperity of chemical industry is expected to rise in 2024, and there is a structural market trend.

Guoxin Securities stated that considering the relative resilience of the global macro economy and the expected end of the Federal Reserve's interest rate hike cycle, as well as the successive introduction of domestic support policies for industries such as real estate, the demand for chemical products at home and abroad is expected to recover and grow, and the overall prosperity of the chemical industry is expected to rebound from the bottom. However, considering the large-scale supply side capital expenditures in the midstream industry, As the demand growth rate for traditional chemical products in the downstream chemical industry has slowed down, the supply-demand contradiction in the segmented industries in the middle reaches of the chemical industry is prominent, and the profit level will still be at a historically low level.