Chlor-alkali integration companies are expected to show significant growth in their interim results

Business Club June 29th Overall market perspective, year-to-date, chlor-alkali product prices rose sharply, affected by the year-on-year increase in operating income of related companies is a high probability event, and upstream and downstream integrated chlor-alkali enterprises due to the cost Advantages, benefits are more obvious, and performance is expected to increase significantly. However, due to the recovery of production capacity after the earthquake in Japan, the sustainability of the increase in chlor-alkali prices remains to be seen.

As for demand support prices, caustic soda is up. In the first half of the year, prices have risen steadily and are gradually stabilizing. Li Wei, an analyst at China Chemical Network, said that the most important reason for the rise in the price of caustic soda was the March earthquake in Japan that led to the closure of Japanese caustic soda manufacturing plants and the reduction in production. As an international exporter of caustic soda, the weakening of Japan’s exports has led to a significant increase in imports from the international market from China. On the basis of strong demand, the rise in production costs is also more easily transmitted to product prices.

The PVC price trend showed a general uptrend. Specifically, it appears as a downward trend after New Year's Day and starts to oscillate upwards after the Spring Festival. Zhang Peichao, director of the Information Department of the China Chlor-Alkali Industry Association, said that the impact factors of PVC are more complex. From the perspective of supply and demand fundamentals, the monthly production of PVC in March and May of this year is relatively high, while the downstream demand is mainly applied to the profiles and pipes of real estate. Relatively weak supply demand growth, which will form a certain pressure on the rise in PVC prices. In addition, similar to caustic soda, China's exports of PVC also benefited from Japan's weakened exports, such as PVC exports in April 60,000 tons, more than twice the amount of exports in March.

Chlor-Alkali Chemical (600618) reported in a quarterly report that the recovery of the world economy has driven basic chemical demand, the company's operating rate has increased, and the recovery growth of exporting caustic soda prices has led to a significant increase in profitability of the company. It is expected that net profit in the first half of the year will increase substantially year-on-year. .

The integrated companies benefited from the increase in the price of chlor-alkali chemical products, which had mixed effects on related listed companies. The chlor-alkali industry is an energy-intensive industry and is greatly affected by electricity and coal. The current increase in electricity costs has made the integration of upstream and downstream companies less affected.

Zhang Peichao said that roughly one-third of China's nearly 180 chlor-alkali enterprises have their own power plants, most of them in the Midwest, and they are less affected by rising costs, while price increases have increased their performance. Guoxin Securities researcher said that the chlor-alkali enterprises that have an integrated coal-electricity-chemical industrial chain in the central and western regions are not subject to raw material restrictions and are expected to maintain a high operating rate as the ultimate beneficiaries of industrial transfer.

According to the quarterly report of Intelli (000635), the company’s operating income increased by 23.85% year-on-year, which was mainly due to the increase in sales prices of main products and the increase in electricity sales settlement methods. The forecast of the first-half performance of Inner Mongolia Junzheng (601216) shows that during the reporting period, the increase in net profit attributable to owners of the parent company over the same period last year was mainly due to the increase in production and sales volume of PVC and caustic soda, the company's leading product, and the stable gross profit margin over the same period last year. During the period, the proportion of expenses decreased, and the company’s production and sales of coal products increased significantly year-on-year.

For future product price trends, new capacity is an important factor. There are many new projects in the chlor-alkali industry, and production capacity in Japan is gradually recovering. These factors may cause the future price rise of the chlor-alkali industry to gradually lose its support. Zhang Peichao said that the caustic soda downstream industries such as alumina, paper and other companies are actively conducting the construction of supporting projects for caustic soda production, improving the industrial chain and reducing costs, which will also have a certain impact on the future demand for caustic soda.

Of course, the short-term price trend is not so pessimistic. Li Wei said that although new capacity is a potential issue, the size of the impact cannot be determined. As the electricity restriction policy continues and the price of raw salt in the upper reaches has not fallen, this means that the price of chlor-alkali chemicals will remain strong in the short term.