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[Industry Focus]：The impact of European energy crisis on China's chemical industry

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The impact of

European energy crisis on China's chemical industry deserves attention. Short-term market concerns, long-term industrial trends. Short-term and long-term effects of the European energy crisis:

short-term export arbitrage. Affected by the energy crisis, there are significant differences in the cost of chemical products in China and Europe. The cost and price of many European chemical products are significantly higher than those in China, which brings opportunities for Chinese chemical products to export energy arbitrage. Judging from the export volume, the performance is really good. However, judging from the price data, the prices of most chemical products are difficult to rise. The expected decline and overseas storage are the main constraints. According to the data in July, the export delivery value of chemical raw materials and chemical products manufacturing increased by + 45.8% year-on-year and-10.0% month-on-month, proving that the recession is coming. If demand is considered beta, it is still the principle to look at the cost advantage alpha and not to reverse beta to seek alpha. In many chemical products, we choose to recommend the vitamin industry at the current point in time, precisely because the demand for vitamins is following the CPI upward, mainstream chemical demand mostly follows the PPI decline, perhaps 23 years to see the bottom of the opportunity to rise. According to the fluctuation of the inventory cycle of the product, select the layout.

Long-term industrial transfer in

. BASF can see from the second quarter report that Europe has not fully felt the pressure of rising energy prices, benefiting from low-cost energy stocks + long-term supply + according to government subsidies, but next year's energy price increase is expected to be fully reflected in the cost of European companies. Gas prices in 2023 may not be as high as the current panic, but the center price is certainly much better than in the past. In addition to deep technological accumulation, a large part of Europe's important position in the chemical industry is due to Russia's cheap energy. When Europe and Russia decoupled, Europe bid farewell to cheap energy, aging equipment and high labor costs will make Europe lose the economy of industrial manufacturing, and in the context of anti-globalization, Europe without energy security will also lose the priority of industrial development. At that time, industrial transfer was expected to occur, and China was expected to become the first choice for perfect industrial clusters and raw material security. This is an excellent opportunity for China's chemical industry to upgrade.

in terms of specific manifestations, there are many possibilities:

1) Large categories based on costs. After the cost of raw materials and energy increases by 2-3 times, the large chemical industry will be uneconomical, vitamins will be sorted out from the proportion of European production capacity (40% +), polyurethane (27%) and other industries deserve attention.

2) Small category, based on supply chain security. For the sake of supply chain security, some of the downstream fine chemical products are expected to speed up the verification of alternative suppliers, domestic enterprises import substitution opportunities are expected to accelerate, after obtaining customers to form a deep binding.

3) For overseas chemical companies, abandoning manufacturing and seizing terminal sales can also be an option. When European production is not economical, it takes time for China to build factories, and there are political risks in investing in China, foreign companies may choose to award technology to Chinese OEMs in order to continue to master terminal sales.

4) M & A, divesting assets is also an option if European companies are in trouble. Chinese companies are expected to acquire European quality assets.

this is an opportunity to further enhance China Chemical's global status, and the quantity and quality are expected to be reflected. The timing needs to match the demand and the product price, the product price bottoms out, and passive going to the library is the best time. After this recession, we are expected to see the dawn, the white horse tour and the dragon in the wild.

Source: Huashan Lun Jian Hui Guan, Huanyi

Tianxia

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