Short-term changes in the chemical industry brought about by carbon neutrality

1.1. The expansion of annual production capacity will slow down and the growth rate of fixed assets will slow down in 2021

The capacity expansion of the chemical sub-industry slowed down in 2021. In 2021, the production capacity of 20 sub-industries in 33 sub-industries will expand, but the growth rate of production capacity will increase significantly compared with the average level of the past three years, only the petrochemical industry chain expansion varieties such as propylene oxide, caprolactam, PC, DMC and related varieties of MDI's own enterprises. At the same time, the production capacity of 10 sub-industries such as DMF, caustic soda, soda ash, yellow phosphorus, polyester filament, and carbon black contracted, and the production capacity growth of the remaining products was flat or significantly decreased compared with the past three years. This also shows that in the context of carbon neutrality, subject to energy control and strict approval, the rate of capacity expansion may remain low.

With the beginning of 2021 as the dividing line, the growth rate of fixed assets and the proportion of fixed assets of listed companies in the basic chemical industry (a total of 422 companies in the basic chemical industry after adjustment according to Shenwan Level classification) have decreased significantly. Since Q1 of 2021, the growth rate of fixed assets of listed companies in the chemical industry has rapidly decreased from 21% to 12% in Q3 of 2021, and the proportion of fixed assets in revenue has gradually decreased from 33.4% to 31.9%. In the context of carbon neutrality, the growth rate and proportion of fixed assets of chemical enterprises that rely on traditional development models may remain at a low level. (Report source: Future Think Tank)

1.2. The price of new energy-related chemicals has increased significantly, and the demand structure has changed

The price of new energy-related chemicals increased significantly. In November 2021, the price of EVA/ lithium iron phosphate/dimethyl carbonate/lithium power PVDF was 9.8/191.4/0.85/415,000 yuan/ton, with an annual increase of 15.8%/132.0%/21.4%/277.3%, and the price reached the highest point in history this year. In the context of carbon neutrality, the supply constraint is accompanied by the continuous increase of downstream demand, and the price of new energy-related chemicals may remain at a high level.

In recent years, the downstream demand structure of traditional chemicals has changed, and the proportion of new energy-related fields has gradually increased. From 2013 to 2020, the proportion of photovoltaic film in EVA downstream applications increased from 9% to 34%; From 2018 to 2020, the proportion of electrolyte solvent in downstream applications of dimethyl carbonate increased from 28% to 36%; From 2015 to 2020, the proportion of polysilicon in downstream applications of industrial silicon increased from 22% to 31%. In the context of carbon neutrality, with the continuous improvement of downstream new energy demand, traditional chemicals will also be more applied to new energy scenarios.

1.3. Some chemical enterprises enter the field of new energy

Since 2021, traditional chemical enterprises have rapidly entered new energy-related fields. For chemical enterprises, the following three advantages are what they have to enter the field of new energy: first, the advantage of raw material resources, the second is the advantage of manufacturing costs, and the third is the advantage of chemical synthesis and chemical process. For example, phosphorus chemical companies enter iron phosphate or lithium iron phosphate, and the resource advantage of phosphate ores is transformed into a cost advantage, while having a more mature chemical synthesis and chemical process basis.

Wanhua Chemical, as a leading chemical company in the field of new energy, has a wealth of new energy material patents and capacity layout. In 2020, it will enter the field of new energy through the acquisition of Zhuoneng lithium Battery. At present, it has capacity planning in the two fields of positive electrode materials and electrolyte. Wanhua's entry into the field of new energy also reflects the inevitability of leading chemical enterprises to grasp the industry trend.

1.4. New energy-related chemical enterprises are developing rapidly

New energy-related chemical enterprises have entered a period of rapid development. Seven new energy-related chemical enterprises, including Polyfluoro, Yahua Group, Tianci Materials, Njie Shares, New Zhou Bang, Dang Sheng Technology, and Star Source Materials, were taken as samples to compare with the listed companies in the basic chemical industry as a whole. Since 2021Q1, the revenue growth rate of the sample companies has remained above 100%, and the net profit growth rate has remained above 150%, which is much higher than the industry average, indicating that the sample companies are in a stage of rapid development. Under the background of carbon neutrality, new energy-related chemical enterprises will benefit from the high prosperity of the downstream industry, or will maintain a high development rate.