Investment advice
We believe that it is difficult to improve the short-term supply-demand tension in the TDI industry. The rise of product prices has strong supply-demand fundamentals, and there is still some room for price rise in the future: at present, the unstable supply of overseas enterprises has driven the rapid growth of China's TDI external demand, and domestic demand is also continuing to recover; While the units of many enterprises in China are being shut down for maintenance, and some units also have unstable operation. The overall output that can be released is very limited. It is expected that there will be a supply-demand gap of 50000 tons in 2022. Under the mismatch of supply and demand in the industry, the price rise of TDI products is expected to continue.
It is suggested to focus on Wanhua Chemical Group Co.Ltd(600309) with 650000 tons of TDI equity capacity and Cangzhou Dahua Co.Ltd(600230) with 150000 tons of TDI capacity.
Industry perspective
TDI belongs to polyurethane industry chain, with strong support of domestic demand and rapid growth of external demand. TDI is located in the middle and upper reaches of the polyurethane industry chain. Sponge and its products are its main application field. In 2021, the consumption proportion in China is as high as 72%. Common objects for terminal applications include sofas, mattresses, car seats, etc. the consumption of such products is rigid and has a high correlation with the real estate and automobile industries. Driven by the recovery of China's real estate sector and the rapid growth of new energy vehicle industry, China's TDI consumption has achieved steady growth, reaching 970000 tons in 2021, a year-on-year increase of 10%. In terms of external demand, under the background of tight overseas supply, China's net export volume has increased significantly in the past two years. In 2021, the net export increased by 61.4% year-on-year to 354000 tons, and the export dependence was as high as 41.8%. In the long run, global consumption and Chinese consumption will continue to grow steadily with the economic recovery. In terms of external demand, considering that the recovery of overseas supply takes time, the net export volume should show a slight decline in the future.
The industry pattern is better under high-tech barriers, and the overall supply will remain tight in the future. In recent years, the growth rate of global TDI capacity has been slow. After 2018, the main capacity increment comes from China. By the end of 2021, the global capacity has totaled 3.58 million tons, and China's capacity accounts for 40%, making it the largest TDI production area. From the production capacity of various enterprises, due to the complex production links, high risks and high technical threshold of TDI, the industry presents an oligopoly pattern, with Cr4 as high as 72%. From the perspective of future capacity increment, overseas capacity will not increase but decrease. A total of 435000 tons of new capacity in China will be put into operation from 2022 to 2023. Considering the production rhythm and production climbing time, and many enterprises have shutdown and overhaul plans this year, it is expected that the effective output released in 2022 will be relatively limited.
Under the mismatch of supply and demand, the prosperity of the industry is rising, and the product price is expected to continue to rise. Since the beginning of this year, due to the recovery of demand but the failure of supply to keep up in time, TDI has ushered in a new round of price rise. The market price in East China has risen from 15350 yuan / ton at the beginning of this year to 19500 yuan / ton, an increase of 27%. From the perspective of industry supply and demand, the downstream demand of TDI is expected to achieve steady growth driven by the recovery of real estate and consumption upgrading. Assuming that the growth rate can continue to maintain 6% in the next three years, China's demand can be increased to 94991050000 tons in 2022-2024. In terms of import and export, the tight overseas supply is still difficult to improve in the medium and short term, and China's net export volume is expected to remain high in 2022. In terms of supply, considering that there is a certain climbing production cycle in the unit maintenance plan and new production capacity of some enterprises, the output that can be released in the next three years will be 1.25 million tons, 1.34 million tons and 1.38 million tons respectively. From the perspective of overall supply and demand, it is estimated that the supply and demand gap of the industry from 2022 to 2024 will be - 50000 tons, 0 tons and 10000 tons respectively. It can be seen that there is an obvious shortage of overall supply in 2022. The tension between supply and demand is expected to continue this year, which is expected to promote the continuous rise of product prices.
Risk tips
Downstream demand was lower than expected, new production capacity was put in higher than expected, overseas supply resumed higher than expected, and raw material prices fluctuated
