Capacity transfer

Overseas production load reduction phenomenon or will be repeated, capacity transfer is expected to further accelerate. Over the past decade, global chemical production capacity has gradually transferred from developed countries and regions such as Europe and the United States to Asia, and only Asia will maintain positive output growth in 2020 (mainly contributed by China). Under the impact and impact of the epidemic, the short board of the industrial chain of overseas countries has been gradually exposed, and the lack of some industrial links and labor difficulties have caused a rapid decline in the capacity utilization rate. The capacity utilization rate of the European chemical industry fell to a minimum of 74% in 20Q2, and the capacity growth rate was significantly reduced.

1.2.2 China's chemical industry is expected to undertake overseas production capacity with industrial chain advantages

In the past ten years, the rise of China's chemical industry has accelerated, and its competitive advantage has been continuously enhanced. According to CHEManager, China's chemical consumption in 2020 is nearly 1.6 trillion euros, making it the world's largest chemical consumption market. Benefiting from the huge domestic downstream consumer market and engineer dividends, the production capacity and sales of basic chemicals and general materials represented by bulk commodities have expanded rapidly. According to the European Chemical Council, China's global chemical sales market share has increased from 25.8% in 2010 to 44.6% in 2020, Europe is the world's second largest chemical sales market, its market share has fallen to less than 20%, the share of traditional chemical powers mainly in the United States and Europe is gradually shrinking.

From the level of technology and innovation, China's chemical industry in the past ten years of capital expenditure and research and development costs increased significantly, including 2020 research and development costs of nearly 14 billion euros, has achieved the European catch-up and beyond. At present, China still has a gap with European and American enterprises in fine chemicals and high-performance new materials, but the gap in research and development and technology has been shrinking, and in some bulk chemicals, China has established many competitive advantages, including product quality, production efficiency, personnel costs and low energy, etc. And through continuous technological innovation and capacity expansion to enhance the global market share.

Under the industrial structure of the whole industrial chain, the operating advantages of China's chemical industry have gradually emerged. At present, China has all the industrial categories listed in the United Nations industrial classification, complete industrial categories, perfect infrastructure, more than 500 kinds of major industrial products in the world, China has more than 220 kinds of industrial products ranked first in the world. The complete industrial system, the related supporting ability of the upstream and downstream of the superimposed industrial chain and the industrial agglomeration effect ensure the great operational resilience of China's chemical industry, and can effectively maintain the stability of the industrial supply chain even under the impact of external uncontrollable factors. As of 21Q4, the capacity utilization rate of China's chemical industry has exceeded the pre-epidemic level, and the stability of the overall production and operation has continued to improve.

1.2.3 The domestic vitamin, polyurethane and coal chemical industries are expected to benefit fully

At present, there are expectations of capacity transfer for chemical products with relatively high production capacity in Europe. We have calculated the production capacity of major chemical products in China and Europe, and sorted them according to the chemicals that account for more than 10% of the production capacity in Europe, as shown in the following table. At present, the production capacity of potassium fertilizer, vitamins (VA, VE, etc.), polyurethane (MDI, TDI), chlor-alkali (soda ash, caustic soda) and coal chemical industry in Europe is still relatively high, of which the production capacity of each vitamin accounts for more than 36%. We expect that with the tightening of energy supply and prices continue to rise, the above-mentioned chemicals are expected to further transfer capacity to the domestic, domestic potassium fertilizer, vitamins, polyurethane, soda ash and coal chemicals and other sectors of production capacity growth is expected to increase, the performance elasticity of relevant companies or will continue to enhance.