Supply and demand are in the ascendant - investment strategies for the chemical industry in 2023 (Part I)

Editor's note: 2023 is just around the corner
.
With the optimization of epidemic prevention and control policies, the efforts of measures to stabilize growth and the low base effect, many research institutions predict that China's GDP growth rate will rebound
significantly this year.
As a pillar industry of the national economy, the chemical industry links various resources and energy in the upstream, and is directly related
to the national food, clothing, housing and transportation in the downstream.
In 2023, the chemical industry will have to consider both inventory cycle fluctuations and track switching, so which areas will become the strongest outlet for capital? It will comprehensively sort out the petroleum and chemical investment strategies of Huaxin Securities, Kaiyuan Securities, Changjiang Securities, China Merchants Securities and other securities companies in the first and second parts to feed readers
.

The recent Central Economic Work Conference clearly proposed to focus on expanding domestic demand, the recent adjustment of epidemic control policies has also accelerated the recovery of the domestic consumer market, under comprehensive expectations, a number of securities companies believe that the demand for some chemicals is expected to resume growth in 2023, and the new chemical materials sector involved in the upgrading of new energy, energy storage, semiconductors and military industries will remain high
.
Among them, semiconductor materials, photovoltaic materials, lithium battery materials, etc.
are particularly worthy of investors' attention
.

Semiconductor materials: accelerate progress with domestic substitution

In 2022, due to the fluctuation of the global economic environment and industry boom cycle and the repeated impact of the epidemic, the entire electronics industry is facing certain operating pressure
.
But overall, China's semiconductor industry continues to grow
.

Guosen Securities Research Report pointed out that the localization rate of China's semiconductor materials will only be about 10% in 2021, which is at a disadvantage
in terms of category richness and competitiveness.
However, in the long run, China's integrated circuit industry will embark on the road of independent innovation, and it is expected that domestic materials and equipment can get more resources and opportunities, and the domestic substitution cycle is expected to be shortened
.

In recent years, the demand for semiconductor applications and consumer markets has grown steadily, and global semiconductor sales reached US$555.
9 billion in 2021, an increase of US$45.
5 billion over 2020; It is expected to continue to grow in 2022, with semiconductor sales reaching $601.
4 billion.

There are many types of semiconductor materials, and the top three largest market shares are silicon wafers, gases, and photomasks
.
In addition, the market shares of polishing liquid and polishing pad, photoresist supporting reagent, photoresist, wet chemicals and sputtering target are 7.
2%, 6.
9%, 6.
1%, 4.
0% and 3.
0%,
respectively.

GF Securities Research Report believes that entering the field of semiconductor materials (electronic chemicals) through endogenous R&D or epitaxial mergers and acquisitions is a more common mode
for chemical companies to seek transformation in recent years.
Successful transformation companies can obtain higher market valuations while achieving faster industry growth rates, ushering in a wave of double growth
.
In the wave of rapid development of the domestic semiconductor industry, related material companies have also ushered in a good opportunity
for domestic substitution.
Some enterprises with strong R&D strength, leading customer level, and successful product transformation and upgrading are expected to share the dividends of the rapid development of
the semiconductor industry.

Ping An Securities Research Report believes that the "silicon cycle" and the macroeconomic cycle and other factors are superimposed, and the semiconductor industry is expected to bottom
out in 2023.

The Western Securities Research Report believes that the increase in US export controls will accelerate the domestic substitution of semiconductor materials, and they are optimistic about semiconductor materials, components and related equipment, as well as the silicon carbide market
.

Photovoltaic materials: the tens of billions of POE market is waiting for a breakthrough

In 2022, driven by China's policies, the new installed capacity of the domestic photovoltaic industry has increased significantly, and the demand for photovoltaic film has also increased
.

Photovoltaic film raw materials are divided into ethylene-vinyl
acetate copolymer (EVA) and polyolefin elastomer (POE).
As the mainstream raw material of photovoltaic film, EVA has a high degree of import dependence and greater space for localization in the future
.
At the same time, it is expected that the demand for EVA in China's photovoltaic film field will account for up to 45.
05%
in 2025.

Another mainstream raw material POE can be used in photovoltaic, automotive, cable, foam, home appliances and other fields, at present, photovoltaic encapsulant film has become the largest application field
of POE.
According to the data of "China's photovoltaic industry development roadmap (2021 edition)", the market share of domestic POE film and expanded polyethylene (EPE) film has increased to 23.
1%
in 2021.
In recent years, with the continuous rise of China's photovoltaic module production and the continuous penetration of POE in photovoltaic film, the domestic demand for POE has grown
steadily.

However, due to the high barriers of POE production process, domestic enterprises do not yet have the mass production capacity of POE, and China's POE consumption all depends on imports
.
Since 2017, domestic enterprises have successively developed and laid out POE products, and private chemical enterprises such as Wanhua Chemical, Dongfang Shenghong, Rongsheng Petrochemical, and Satellite Chemical are expected to achieve domestic replacement of POE in the future, and this 10-billion-level market is waiting for a breakthrough
.

Lithium battery materials: The shipment volume of the four main materials has been further improved

In 2022, China's new energy vehicle and lithium battery energy storage market will maintain a high prosperity, driving a significant increase
in lithium battery material shipments.
According to data from the China Association of Automobile Manufacturers, domestic production and sales of new energy vehicles reached 6.
253 million units and 6.
067 million units respectively in January~November 2022, a year-on-year increase of 1 times, and the market share reached 25%.

The Advanced Industry Research Institute (GGII) predicts that domestic sales of new energy vehicles will exceed 6.
7 million units in 2022; It is expected that the sales volume of China's new energy vehicle market will exceed 9 million units
in 2023.
In 2022, the growth rate of China's lithium battery shipments is expected to exceed 100%, the growth rate of power battery shipments is expected to exceed 110%, and the growth rate of lithium battery energy storage shipments is expected to exceed 150%.

The substantial increase in lithium battery shipments has driven the four main materials of positive electrode, negative electrode, separator and electrolyte, as well as other lithium battery materials such as lithium hexafluorophosphate and copper foil to varying
degrees.

Data show that in the first half of 2022, China's lithium battery cathode material shipments were 770,000 tons, a year-on-year increase of 62%; The shipment volume of anode materials was 540,000 tons, a year-on-year increase of 68%; The diaphragm market shipped 5.
4 billion square meters, a year-on-year increase of more than 55%; Electrolyte shipments were 330,000 tons, a year-on-year increase of 63%.

Overall, the overall shipments of the four major domestic lithium battery main materials will maintain a growth trend
in 2022.

GGII expects that in 2023, the domestic lithium battery market shipments will exceed 1TWh, of which power battery shipments are expected to exceed 800GWh, energy storage battery shipments will exceed 180GWh, which will further drive the overall shipment of the four major materials of lithium batteries to further increase
.

Although the price of lithium mine and lithium salt fell
in December 2022.
However, in the view of brokers, this is mainly due to the off-season effect, and the lithium price "inflection point" has not arrived
.

West China Securities believes that the fluctuation of lithium salt prices is a normal fluctuation accompanying the off-peak season of the industry, rather than an "inflection point"
.
Shenwan Hongyuan Securities also believes that with the further release of raw material production capacity in 2023, the trend of profit transfer of lithium battery material industry chain from top to bottom will continue
.
Zheshang Securities believes that the marginal supply of lithium resources may exceed demand in the second half of
2023.