Domestic petrochemical products usher in the "outlet" of wealth creation

Recently, the international energy market has been up and down
.
At the end of September, the Nord Stream 1 and Nord Stream 2 transmission pipelines of Russian natural gas leaked, and natural gas prices soared sharply; At the beginning of October, OPEC+ decided to reduce crude oil production by 2 million barrels per day in November, and international oil prices also rose, with New York light crude oil rising 16.
48%
in the first week of October alone.
The sharp fluctuations in energy prices have forced petrochemical plants in some foreign regions to stop, product prices have risen sharply, and domestic related petrochemical enterprises have ushered in the "outlet"
of wealth creation.

Natural gas supply is limited European petrochemical companies reduce production

On September 26, two Nord Stream pipelines exporting Russian natural gas to Europe leaked
at the same time.
Gas supply constraints have caused European gas prices to soar.

Nord Stream 1 is an important pipeline for Russia to transport gas to Germany and Western European countries, which has been in use since 2011 and provides 55 billion cubic meters of natural gas to Germany and Western European countries every year, with a gas transmission volume of 59.
2 billion cubic meters in 2021, becoming an important part
of the international energy pattern.
Since June 2022, Russia has continuously reduced the load
of Nord Stream 1.
Affected by this, international natural gas prices showed a skyrocketing trend, and European natural gas prices once reached a record 321 euros / MWh
.

Natural gas is both an important energy source and an important chemical raw material
.
It is understood that more than 40% of the raw materials of the European chemical industry come from natural gas, and the production process also relies heavily on natural gas
.
At the same time, Europe is home to major chemical companies
such as BASF, Covestro, Solvay, DSM, LANXESS, Evonik and Henkel.
BASF, a European MDI and TDI producer, has said that 60 percent of the natural gas it buys in Europe is used to produce the energy needed to produce steam and electricity, and the remaining 40 percent is used to produce base chemicals
.
The Nord Stream pipeline accident will affect Europe's energy and raw material supply, which in turn will affect the supply
of European chemicals.

According to a study by the German Chamber of Industry and Commerce (DIHK), about 16% of the 3,500 German industrial companies surveyed believe that it is necessary to reduce production or abandon some of their business, of which nearly one-quarter have been reduced and 1/4 of the production reductions, and the remaining one-half are planning to take measures
.

OPEC+ implements production cuts Crude oil prices continue to rise

Not only natural gas, but also oil prices continue to rise
.
On October 5, local time, the 33rd OPEC+ ministerial meeting decided to reduce crude oil production by 2 million barrels per day
in November.
Affected by this news, international oil prices rose
in response.

International oil prices have continued to recover since the low point in April 2020, and after entering 2022, the Russia-Ukraine conflict has triggered a panic in global crude oil supply, and the price once exceeded $137 / barrel on March 8, setting a record
for the highest oil price since 2010.
In the first half of 2022, Brent average oil prices were $105/barrel, up 66%
year-on-year.
In the third quarter of this year, the dollar index continued to strengthen, the market is not optimistic about the United States and even the global economy, the demand side is suppressed, and the international oil price has fallen significantly
.
As of September 30, Brent crude oil futures closed at $87.
96 / barrel, down $26.
85 / barrel, or 23.
39%,
from June 30.

Around the issue of crude oil production, there is a continuous fierce game
between European and American countries and OPEC+.
Most of the Middle East's oil-producing countries depend on crude oil for their income, and a fall in oil prices will worsen their fiscal
balances.
According to the International Monetary Fund (IMF), the price of fiscal balance of crude oil in Saudi Arabia, which ranks first in oil production in the world, is $79.
2 per barrel
.
If oil prices fall below that level, it means that Saudi Arabia will run a fiscal deficit
.
Countries such as Iraq, which ranks second in oil production, are mainly concentrated in 75~79 US dollars / barrel
.
$80/barrel can be said to be the common "bottom line"
of major oil producers.
Therefore, it is unlikely that crude oil prices will fall sharply in the later stage
.

Product prices are rising The domestic petrochemical industry welcomes business opportunities

Soaring energy costs, while impacting the European chemical industry chain, have brought business opportunities
to related petrochemical products industries in other countries.

According to the data provided by Baichuan Information, chemicals with a high proportion of European production capacity mainly include vitamins, MDI, propylene oxide, etc.
, with production capacity accounting for 45%, 27% and 24%
respectively.

According to the data provided by Zhuochuang Information, in 2021, domestic exports and output of MDI and propylene oxide products accounted for 57% and 0.
1%
respectively.

Specifically, the MDI industry is highly concentrated, with the production capacity of large factories such as Wanhua Chemical, BASF, Covestro, Dow, and Huntsman accounting for more than
90% of the world's total production capacity.
Affected by the rise in foreign prices, on September 29, Wanhua Chemical announced that since October, its aggregate MDI listing price in China has been 19,800 yuan (ton price, the same below), which is 2,300 yuan higher than the price in September; The listing price of pure MDI is 23,000 yuan, which is 2,000 yuan
higher than the price in September.

From the perspective of the propylene oxide industry, the current European propylene oxide production capacity accounts for 25% of the world's total production capacity, and China accounts for about 30%.

According to Zhuochuang information data, in 2021, China's propylene oxide consumption reached 4.
1024 million tons, a year-on-year increase of 21.
3%.

At present, the supply and demand of propylene oxide in China are still unbalanced, and the insufficient part depends on imports
.
Due to foreign production capacity constraints, since the beginning of August, the domestic price of propylene oxide has risen from 8,000 yuan to 10,000 yuan
.

From the perspective of the vitamin industry, global vitamin manufacturers are mainly concentrated in Europe and China, of which the supply of vitamin A in Europe accounts for more than 50% of
the world.
And in the past ten years, the vitamin industry has not had any new large-scale manufacturers in the world
.
At present, vitamins are mainly used in feed, medicine and cosmetics industries, of which pig feed is the largest downstream application field of
vitamins.

"With the recovery of the pig breeding industry, feed consumption is expected to gradually recover, driving the growth of vitamin demand, and vitamin prices are expected to still rise
.
" Some brokerage analysts believe
.

Liu Wei, an analyst at Haitong Securities Co.
, Ltd.
, believes that the sharp rise in European natural gas prices will support the global price of related chemicals, and the performance of domestic petrochemical enterprises in these sectors is worth looking forward to
.