Core view: polyolefin is still in a period of strategic opportunity
Demand is expected to continue to grow
The downstream application of PE is mainly film and container, and the overall demand continues to grow.
(1) film: the consumption of downstream food and clothing has warmed up, and the corresponding packaging demand has increased; “Plastic ban order” may affect the demand for agricultural film and express packaging.
(2) pipes: Although the subsequent real estate construction slows down with the tightening of policies, Rural Revitalization and urban old community reconstruction projects drive demand.
(3) hollow container: the demand for beverage / daily chemical packaging is improving.
(4) injection molding PE: used for turnover box / pallet, etc. Downstream demand is improving with the consumption growth of fruit, food, beer and other industries.
The application of PP focuses on wire drawing and injection molding, and there are new growth points in downstream demand.
(1) wire drawing: it is mainly used for the packaging of plastic woven products, grain, cement, chemical fertilizer, etc., and the downstream demand is generally stable.
(2) Co injection molding: new energy vehicles support relevant needs; Common household appliances usher in the replacement period and export is booming.
(3) homopolymer injection molding: good export performance of toys and small household appliances; Takeout lunch boxes are growing rapidly, but the “plastic ban” makes PP lunch boxes at risk of substitution.
(4) fiber: it is used to make non-woven fabrics. There are growth highlights in downstream medical and health applications (wet wipes, diapers, medical protective clothing, etc.).
The import gap is large, and China’s PE / PP operating rate is expected to remain high.
PE: in 2020, China’s PE output will be 20.32 million tons, the average annual operating rate will be 90%, the net import volume will reach 18.28 million tons, and the external dependence will be 48%.
The existing capacity is 28.016 million tons, mainly based on ethylene cracking polymerization process. In the future, the new capacity will be 20.73 million tons. It is estimated that the capacity will reach 3272 / 3685 / 4075000 tons from 2022 to 2024 respectively. In terms of demand, the consumption is expected to reach 3927 / 4127 / 42.82 million tons from 2022 to 2024 respectively. We expect that the new capacity will effectively replace the import gap, and the overall operating rate will still be as high as 85% / 86% / 87% respectively.
PP: in 2020, China’s PP output was 25.54 million tons, the average annual operating rate was 91%, the net import volume was 4.17 million tons, and the external dependence was 15%.
The existing capacity is 32.929 million tons, mainly based on ethylene cracking polymerization process. In the future, the new capacity will be 14.885 million tons. It is estimated that the capacity will reach 35.98/37.53/42.48 million tons from 2022 to 2024 respectively. In terms of demand, the consumption is expected to reach 3217 / 3342 / 34.69 million tons from 2022 to 2024 respectively. We expect that the new capacity will effectively replace the import gap and increase exports, and the operating rate will still be as high as 87% / 89% / 84% respectively. Comprehensively consider the prosperity of polyolefin industry and give the industry a “recommended” rating.
Recommended concerns: Wanhua Chemical Group Co.Ltd(600309) , Ningxia Baofeng Energy Group Co.Ltd(600989) , Hengli Petrochemical Co.Ltd(600346) , Rongsheng Petro Chemical Co.Ltd(002493) , Zhejiang Satellite Petrochemical Co.Ltd(002648) , Jiangsu Eastern Shenghong Co.Ltd(000301) .
Risk tips: economic downturn risk, policy restriction risk, project construction risk less than expected, market volatility risk, raw material price rise risk, environmental protection and safety production risk, increased competition in the same industry risk, insufficient downstream demand risk, focus on the risk that the company’s performance is less than expected
