[Industry Focus]：Analysis of capacity expansion and earnings expectations in the polyether industry, what new projects will be put into production in 2024?

1. Polyether Industry Overview and Capacity Status

polyether as an important chemical raw material, it is widely used in the production of polyurethane, polyester, polyamide and other polymer materials. In recent years, with the continuous development of the global chemical market, the production capacity of the polyether industry has also continued to expand. However, this expansion has not brought about the expected balance of supply and demand in the market, but has led to a long-term surplus of nominal capacity.

According to statistics, the nominal production capacity of China's polyether industry has reached about 7.6 million tons in 2023, but the actual output is only about 4.8 million tons, and the capacity utilization rate is about 63%. This means that although the polyether industry has a large amount of production capacity, the actual market demand has not reached the corresponding level, resulting in waste of production capacity.

Analysis of the reasons for the imbalance between supply and demand in the 2. market

1. Slow growth in industry demand: although polyether has a wide range of applications, the slowdown in global economic growth and insufficient demand growth in downstream industries have limited the growth rate of the polyether market in recent years.

2. Fluctuations in raw material prices: the main raw materials of polyether are propylene oxide (PO) and ethylene oxide (EO), and their price fluctuations directly affect the production cost and market price of polyether. In recent years, the fluctuation of raw material prices has brought challenges to the production and operation of polyether enterprises.

3. Over-expansion of production capacity: in the case of slow growth of market demand, some enterprises blindly expand their capacity in order to seize market share, resulting in overcapacity.

New Capacity Planning and Market Competition Pattern of 3. Leading Enterprises

in 2024, leading enterprises in the polyether industry, such as Wanhua Chemical, Longhua New Materials, Zhejiang Petrochemical, etc., have new capacity launch plans. The introduction of these new capacities will further intensify market competition, but will also promote technological progress and product innovation in the industry.

1. Wanhua Chemical: as a leading enterprise in the domestic polyether industry, Wanhua Chemical plans to put into production its high-performance material integration project in Penglai Industrial Park in the second half of 2024, adding 500000 tons/year of polyether production capacity. This will further consolidate its leading position in the industry and is expected to drive technological progress and product upgrades throughout the industry.

2. Longhua New Material: as the largest domestic supplier of POP polyether, Longhua New Material plans to increase its production capacity to about 930000 tons in the second quarter of 2024, which is only one step away from the capacity of one million tons. With the commissioning of its 310000-ton expansion project, the production capacity of Longhua New Materials will rank second in China, further enhancing its competitiveness in the market.

3. Zhejiang Petrochemical: zhejiang Petrochemical, a subsidiary of Rongsheng Petrochemical, has invested in the construction of a 380000-ton/year polyether plant in Zhoushan Green Petrochemical Base, some of which has been put into operation in 2023, and subsequent production capacity will be gradually released in the future. With its strong capital and technical strength, Zhejiang Petrochemical is expected to occupy a place in the polyether market.

In addition, Hongwei Chemical, Sinochem Dongda Quanzhou and other enterprises are also carrying out polyether capacity expansion or new construction, the commissioning of these projects will further intensify market competition.

Analysis of 4. Capacity Growth and Earnings Expectations

although the polyether production capacity expected to be launched in 2024 is large, considering the uneven distribution of launch time and the steady growth of market demand, the profitability of the polyether industry is expected to remain good in 2024. However, this will also depend on fluctuations in raw material prices, changes in market demand, and the company's own operational management capabilities.

From the perspective of capacity growth, due to the introduction of new capacity and the steady growth of market demand, it is expected that the capacity growth rate of the polyether industry will pick up in 2024. However, considering the current situation of overcapacity in the industry and the intensification of market competition, the growth rate of production capacity will still be at a low level.

From the perspective of profit expectations, with the introduction of new production capacity and the steady growth of market demand, the profitability of polyether companies is expected to be improved. However, this will also depend on the company's own cost control, product quality and marketing strategy. Therefore, while expanding production capacity, polyether companies also need to pay attention to market changes and cost control to achieve sustainable development.