<b>The current policy of automobile and home appliances boosts expectations. The demand side of polyurethane, refrigerant, modified plastics and other industries need not be too pessimistic in 2019</b>

Event:

According to CCTV news, Ning Jizhe, deputy director of the National Development and Reform Commission, said that measures to promote the consumption of hot products such as automobiles and home appliances will be formulated this year.

Brief Comments

Many chemicals are involved in the upstream of automobile home appliances, polyurethane, refrigerant, modified plastics and other industries are greatly affected

In 2018, my country's automobile sales fell year-on-year Compared with the year-on-year increase of 3.04% in 2017, it dropped sharply by 6.64 percentage points. In the first 11 months of 2018, the accumulative year-on-year growth rates of the major household appliances such as refrigerators, air conditioners, washing machines, and color TVs were 2.9%, -0.3%, 14.9%, and 10.3%, respectively. Compared with the same period in 2017, the growth rates changed by -11, -4, +13, -16 percentage points, with the exception of color TVs, the year-on-year growth rates all fell sharply. There are many chemicals involved in the upstream of automobile and home appliances, the more typical products are polyurethane, refrigerant and modified plastics. If the stimulus policy for the consumption of automobile and home appliances is introduced in the future, the demand for the above chemicals is expected to usher in an improvement.

MDI: MDI is a globally competitive product with a wide range of downstream applications. In foreign countries, the downstream of MDI is mainly building materials (50%), adhesives (13%), refrigerators (12%), etc.; The downstream of MDI is mainly concentrated in refrigerators (45%), building materials (18%), automobiles (13%) and other fields. The increase in sales of refrigerators and freezers will stimulate the demand for MDI. The price of MDI has been on a downward trend since 2018, and the domestic price of polymeric MDI dropped from 27,000 yuan in early January 2018 to 12,000 yuan at present The price of domestic pure MDI dropped from 30,000 yuan in early January 2018 to the current 20,400 yuan. In the long run, MDI The device has the characteristics of high barriers and high investment, and has always maintained an oligopoly industry structure. There are only 8 suppliers in the world, of which Wanhua Chemical, Covestro, BASF, Huntsman, and Dow jointly occupy the global production capacity More than 85%. At present, the price of MDI is already at the bottom of history, showing signs of stabilizing, and it is expected to rise gradually in the future.

Propylene oxide: The downstream of PO is mainly soft foam polyether (accounting for 59%, mainly used in furniture, automobiles, shoe materials) and rigid foam polyether (accounting for 18%, mainly used in refrigerators, automobiles, and building insulation), if the production and sales of home appliances and automobiles are boosted, it will directly benefit product demand. From the price point of view, in 2018, the price of PO fluctuated at a high level around the price center of 11,000 yuan, and the relevant manufacturers maintained good profits ability. At present, new chlorohydrin method devices have been banned in China due to environmental protection and high pressure. The direct oxidation method lacks mature technology, and the co-oxidation process is limited by the digestion of by-products. The new production capacity will be launched very slowly in the future. The current national production capacity is about 3 million tons, and the industry's production capacity is scarce. will last.

Refrigerants: The downstream of refrigerants is concentrated in air conditioners (78%), refrigerators (16%), and automobiles (6%). The introduction of the above-mentioned industrial policies will stimulate their downstream demand. Since 2017, the price of the entire refrigerant industry chain has remained high. In terms of raw materials, fluorite is a national strategic resource and hydrofluoric acid is a hazardous chemical. The expansion of production capacity is restricted. In terms of production capacity, the second-generation refrigerant is gradually being reduced, and the third-generation refrigeration It is expected that the quota system will also be implemented in 2020, and the new production capacity will be limited; on the demand side, the withdrawal of overseas refrigerants will be accelerated, driving exports, and domestic air conditioners are entering the year of renewal and maintenance. It is expected that the prosperity of the industrial chain will remain.

Modified plastics: The demand side is expected to improve: the downstream of modified plastics is mainly used in household appliances, automobiles, electronic appliances, office equipment, power tools, lighting and other industries, of which automobiles account for 30% and home appliances account for 30%. 29%, the two together account for nearly 60% of the demand for modified plastics. As the oil price center moves down, the cost of modified plastics will improve: the upstream raw materials of modified plastics are mainly PP, ABS, PS and other petrochemical industry chain products, which are highly correlated with oil prices. The cost transmission ability of the industry is relatively weak, and historically, profitability has shown a significant negative correlation with oil prices. Since October 2018, oil prices have risen and fallen back. Although they have rebounded in early 2019, the center of oil prices is still likely to decline compared with 2018, and the cost of modified plastics will also usher in an improvement. Structural overcapacity leaves leading enterprises with the opportunity to break the situation: At present, there are thousands of enterprises engaged in the production of modified plastics in China, but the production capacity is very scattered. , showing typical structural overcapacity. If domestic enterprises want to compete with international chemical giants in terms of technology, scale and industrial chain, there is no doubt that they need to find opportunities among leading enterprises.