Future judgment of chemical industry prosperity

From the perspective of the company's various businesses, viscose prices have reached a historic low, and the viscose expansion cycle is nearing an end, and industry supply and demand are expected to improve. The new capacity of soda ash from 2020 to 2021 is less, and the new capacity of chlor-alkali in 2020 is about 3%, and the strong toughness of real estate supports downstream demand; Silicone production expansion is more, but the price is close to the low point in 2016, and there is little room for downward movement.

Linglong Tire: The national tire layout is global, and the performance is strong

The company is the first in the profitability of the A-share tire sector, and the only tire sector to be included in the three major international indexes (MSCI, FTSE Russell, S&P Emerging Markets). In Q3 2019, the company achieved operating income of 12.509 billion yuan, an increase of 13.3%. Net profit was 1.214 billion yuan, up 37.3% year on year. The domestic automotive tire market demand is mainly divided into replacement (AM) and supporting (OEM).

According to the proportion of car ownership, sales, replacement and supporting in China, the domestic demand for car tires from supporting in 2018 is about 139 million, the replacement domestic demand for passenger cars is 356 million, and the replacement domestic demand for commercial vehicles is 184 million in 2018. As a result, domestic tire demand totaled 679 million in 2018.

2 Petrochemical industry: The private refining industry has entered the performance realization period, and the olefin lightweight route has cost advantages

1) It is expected that international oil prices in 2020 will continue to be affected by the slowing growth of global crude oil demand and the continuous increase of supply. With the breaking of the pipeline transportation bottleneck in the Permian Basin, US shale oil production is expected to continue to grow. In addition, OPEC will continue to extend the production cut agreement, which will also form effective support for oil prices. We expect the core range of international oil prices to remain at $50-80 (brent), which is positive for the cost side of the petrochemical industry chain.

2), private large refining into the performance period, low and medium oil prices will bring cost side benefits. 2019 is the first year of operation of private large refining and chemical enterprises, Hengli Petrochemical Changxing Island 20 million tons of refining and chemical integration plant was first put into operation at the end of 2018, of which the refining and chemical sector performed well, and then Hengyi Brunei 8 million tons of refining and chemical plant was fully put into commercial operation in November 2019. Zhejiang Petrochemical in Zhoushan phase I 20 million tons of refining and chemical project is also about to put into production, the current oil price position is good for the overall refining and chemical project.

3), the olefin lightening route is irreversible, and PDH and ethane cracking to ethylene has cost advantages. In the future, the profitability of olefins will decline under the background of the synchronous expansion of the three types of process routes (oil head, gas head, coal head), but PDH and ethane cracking to ethylene have the most cost advantages in several process routes.

4), PX-PTA-Polyester industry chain: a new round of PTA expansion cycle is coming, good for PX and downstream polyester. We estimate that the new production capacity in 2020 will increase by nearly 20% year-on-year, close to 10 million tons of new production capacity, PTA prosperity will continue to decline, prices will also be under pressure, PTA as the main downstream demand of PX and the main raw material cost of polyester, we believe that the PTA price decline will benefit PX and downstream polyester, especially polyester filament.