Issue 2, 2023 - December 2022 Petroleum and Chemical Industry Prosperity Index released

1.
Many central banks raised interest rates by 50BP, and recession expectations further heated up

On December 15, the Fed's FOMC announced a 50BP interest rate hike, a 25BP reduction, in line with market expectations
.
The next day, central banks including the European Union, the United Kingdom, Switzerland, Norway, Hong Kong and other central banks followed the Fed's pace of raising interest rates BP.

In addition, the ECB announced that it will start a balance sheet reduction program from March 2023, which is expected to reduce by an average of 15 billion euros/month
.
Subsequently, the market's expectations of a recession further strengthened
.
After the intensive interest rate hike meeting, the dollar index continued to weaken, including commodities and other assets showed a state of volatility, the market's expectations of interest rate cuts under the recession heated up simultaneously, and the dollar index weakened
sharply.
On December 22, the Bank of Japan announced that it would increase the control range of YCC long-term interest rate fluctuations from 0.
25% to 0.
5%, which was seen by the market as a 50BP
rate hike in disguise.
This was followed by a rapid rise in the yen against the dollar, and the dollar index slipped
further.
The global central bank's interest rate hike has also led to a clear gap in the domestic year-end liquidity market, and bond yields and overnight lending rates have rebounded
significantly.
The central bank uses open market tools to release sufficient liquidity to the market in the short term and protect the
demand for liquidity in the New Year.

2.
Frequent policies at the end of the year to expand domestic demand are in the forefront

On December 14, the State Council issued the Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035).

On December 16, the Central Economic Work Conference spent on "We must give priority to restoring and expanding domestic demand, enhance consumption capacity, improve consumption conditions, and innovate consumption scenarios
.
" "At the same time, the central economic work has made it clear that it will continue its proactive fiscal policy and prudent monetary policy
in 2023.
" The central bank work meeting on December 22 further added: "It will give full play to the role of the market-oriented adjustment mechanism of deposit interest rates to promote the steady reduction of corporate financing costs"
.
In addition, the policy gives clear requirements
for stabilizing the development of the real estate market, ensuring the delivery of buildings, protecting people's livelihood, meeting the financing needs of the industry, and promoting industry restructuring and mergers and acquisitions.
The intensive release of favorable policies has stabilized market expectations to a certain extent, enhanced market confidence, and with the gradual implementation of precise prevention and control measures, it is expected that after the Lunar New Year in 2023, the market will turn into a recovery process
.

3.
The winter cold wave hits the United States Natural gas prices do not increase, but fall

On December 23, most of the United States was hit by the worst winter storm, LNG exports in the Mexican Gulf were disrupted, tens of thousands of flights were canceled, nearly 300,000 people suffered power outages, and U.
S.
natural gas withdrawals rose sharply, and production fell sharply by 10%.

Up to 3 million b/d refineries were shut down due to low temperatures, leading to higher refined product prices
.
However, the impact of this cold wave is significantly smaller than the cold wave in the first quarter of 2021, crude oil and natural gas have not seen a sharp rise in prices, as the impact gradually fades, natural gas prices have seen a more obvious decline, mainly because the temperature in Europe is higher than the same period, natural gas inventories are still maintained at a high level in the same period, the pressure of replenishment is small, and the European TTF natural gas price fell by 80 euros / MWh
.
The expectation of recession dominates the price trend of the energy market, and the deviation from the supply and demand side pricing is obvious
.

4.
Prospect of economic operation

In summary, the triple pressure of demand contraction, supply shock, and expected weakening still exists, and the petrochemical industry, as an upstream industry, under the dual pressure of continuous high cost and sluggish demand, the overall profitability has fallen sharply compared with the same period, and the overall prosperity has dropped
significantly compared with the same period.
However, under the superimposed impact of multiple negative factors, the overall prosperity of the petrochemical industry showed obvious resilience, and the month-on-month decline did not further expand, basically flattening
.
In the New Year stage, because precise epidemic prevention and control measures and fiscal and monetary policy efforts require a landing time, it is expected that the overall economic situation in January will remain stable, with little month-on-month fluctuation
.

appendix

3.
Description of prosperity indicators

Production heat is a prosperity index calculated through the core algorithm of industry production heat based on the three fundamental data of product price difference, start and inventory, reflecting the adjustment
of production and operation by enterprise managers.
It is the most sensitive and leading reflection on the production and operation of the enterprise, and the stability is lower than the cost profit margin and inventory turnover
.

Cost profit margin is an important indicator reflecting the level of input and output of the industry, which is more sensitive among the efficiency indicators and has the highest
stability.
From the perspective of micro-prosperity cycle, high cost profit margin is the most consistent proof
of high prosperity.

Inventory turnover, that is, the turnover speed of inventory, reflects whether the liquidity of inventory and capital occupation are reasonable, and is the core indicator
to measure the utilization rate of enterprise funds.
Its stability and sensitivity are somewhere between
production heat and cost margin.

statement

The information in this report is derived from public information and relevant internal and external information obtained by the China Petroleum and Chemical Industry Federation Business Climate Index Topic Portfolio Method, and the China Petroleum and Chemical Industry Federation Business Climate Index Research Group does not guarantee that the information in this report has changed when the recipient receives this report, nor does it guarantee that the relevant recommendations will not change
in any way.
The information, opinions and projections contained in this report only reflect the judgment of the Business Climate Index Research Group of China Petroleum and Chemical Industry Federation on the date/time of issuance of this report, and the relevant data such as prices, inventories, market conditions and other relevant data contained in this report may fluctuate
.
At different times, the Business Climate Index Research Group of the China Petroleum and Chemical Industry Federation may issue reports
that are inconsistent with the information, opinions and projections contained in this report.

The contents and opinions in the report are for reference only, and under no circumstances shall the members of the prosperity index research group of China Petroleum and Chemical Industry Federation be responsible
for any direct or indirect losses arising from the use of this report and its contents.