Downstream demand recovery, chemical fiber industry ushered in a cycle reversal

1, the downstream demand boom recovery, chemical fiber industry ushered in a cyclical boom reversal

After the supply-side reform in 2016, the effect of destocking was obvious, and the chemical fiber industry entered the stage of capital expenditure growth in the big cycle. At the end of 2019, the capital expenditure of the chemical fiber industry slowed down, the new production capacity was basically ended, and the industry supply bottomed out. Affected by the epidemic at home and abroad, at the beginning of 2020, the demand of the chemical fiber industry has dropped significantly, the inventory of chemical fiber finished products has accumulated, the profitability of main products has declined, and the valuation of the chemical fiber industry is at a historical low; In the second quarter, the domestic epidemic situation was gradually controlled, the epidemic situation abroad worsened, a large number of foreign orders were transferred into the country, the export demand of chemical fiber downstream textile and clothing increased significantly, the operating rate of domestic downstream enterprises increased, and the inventory continued to decline; 2020Q4 so far, with the gradual recovery of overseas demand, the demand of the chemical fiber industry continues to pick up, downstream enterprises take the initiative to replenish the stock, the profitability of the main products has rebounded, the market attention of the chemical fiber industry has increased, the valuation has entered the repair stage, and the cycle has continued to rise.

1.1, the production cycle of the chemical fiber industry is coming to an end, and the replenishment cycle is ushered in in 21 years

The cumulative fixed asset investment completed in the chemical industry is basically synchronized with the trend of the chemical product price index CCPI, and the prosperity of the chemical industry has gradually recovered since the second quarter of 20 years. Looking back at the trend of fixed capital investment and CCPI in the chemical industry in the past 8 years, it can be found that the capital expenditure of China's chemical industry is basically synchronized with the trend of CCPI. In July 2016, CCPI continued to decline and then rebounded. The cumulative amount of fixed asset investment completed in the chemical industry in August 2016 ushered in an upward inflection point. The sudden outbreak of COVID-19 in January 2020 dealt a major blow to the chemical industry, and the cumulative fixed investment completed in the chemical industry and CCPI fell to historic lows respectively. In the second quarter, the domestic economy entered a normal channel, the demand picked up significantly, and the fixed asset investment in the chemical industry and CCPI recovered steadily. The cumulative amount of fixed investment completed in the chemical industry in 2020 rebounded from -33% in February to -1.2% in December.

The production cycle of the chemical fiber industry is coming to an end, and the new production capacity has entered the market digestion stage. Compared with other chemical products, the chemical fiber industry shows the characteristics of early investment start and early investment end, and the investment cycle corresponds to the order of the business cycle start. From the historical data, the investment situation of the chemical industry and the investment cycle of the chemical fiber industry have obvious correlation. From 2006 to 2019, the chemical fiber industry and the chemical industry have experienced four investment growth periods, with a 4-25 month interval at the beginning of the cycle. In 2019, the new production capacity of chemical fiber varieties has come to an end, and the chemical fiber industry has bottomed out from the perspective of supply. In terms of chemical fiber production capacity, the cumulative fixed asset investment in the domestic chemical fiber industry showed an increasing trend from 2016 to 2018, but the new chemical fiber production capacity is still at a historically low level. In 2020, due to the impact of the production cycle of the chemical fiber industry and the new coronavirus epidemic, the total output of domestic chemical fiber is 61.68 million tons, an increase of only 3.6%. In the next few years, the production of domestic chemical fiber industry continues to slow down, and it is expected that the new supply of the industry is limited.

The change of chemical fiber inventory has a certain lag compared with the trend of CCPI, and it is expected that chemical fiber will usher in a replenishment cycle. Taking 2017-2018 as an example, the 2017Q2-2018Q3CCPI was in the rising cycle, and the chemical fiber inventory increased in 2017Q3-2018Q4, and the trend of chemical fiber inventory had a certain lag synchronization compared with the trend of CCPI, so the chemical fiber inventory as a lagging indicator had a certain predictability. Chemical fiber inventories fell significantly year-on-year from an all-time high of 40.7% in October 2018 to an all-time low of -10.5% in October 2019. Affected by the epidemic in early 2020, downstream demand was hit hard, and chemical fiber inventories increased significantly year-on-year, rising to 23.8% in March 2020. Since the second quarter, domestic chemical fiber production and sales have returned to normal, with the continuous recovery of overseas demand and the increase of export demand, and the inventory has entered the continuous decline channel after experiencing a brief rise in the second quarter. CCPI continues to rise after bottoming out in Q2 in 20 years, and the chemical fiber industry is expected to usher in a replenishment cycle.