Core view
1. Driven by both demand and cost, raw salt prices run at a high level
In the second half of 2021, the price of raw salt rose sharply and continued to operate at a high level. From August to November 2021, the mainstream price of raw salt increased rapidly, from 263 yuan / ton in early August 2021 to 480 yuan / ton in November 2021, and the average price reached the highest level in five years. In December, the price of raw salt continued to run at a high level. As of December 31, 2021, the average price of China’s raw salt market closed at 472 yuan / ton, with a year-on-year increase of about 107.02%.
The rapid rise of raw salt price is mainly affected by the tightening of supply side and the upward rise of production cost. There are two factors affecting the supply side: first, affected by the rainfall weather in the second half of the year, the installations of some raw salt enterprises in China were damaged, and the operating rate of the raw salt industry continued to fluctuate in the second half of the year. According to the data of the Bureau of statistics, the output of raw salt decreased by 14.17% year-on-year in 2021; Secondly, affected by the international epidemic, China’s raw salt import level has also declined. According to the data of Baichuan Yingfu, China’s raw salt import is expected to decline by 16.5% year-on-year in 2021. From the cost side, electricity and power coal costs account for a certain proportion in raw salt production. Affected by safety and environmental protection inspection and “carbon neutralization” policy, coal prices fluctuated sharply in 2021, increasing the production pressure of raw salt enterprises.
Downstream demand is strong, and the price of raw salt is expected to remain high in the future. According to the data of Baichuan Yingfu, caustic soda and soda ash account for 56.45% and 36.81% respectively in the downstream market of raw salt. They are the main application fields of raw salt. From the perspective of new downstream capacity, new chlor alkali capacity projects will be added in Jiangsu, Zhejiang and other places in 2022, and the demand for industrial salt is expected to increase accordingly. In terms of the end market, the main end market of soda ash and caustic soda is the field of building materials. Since this year, the year-on-year growth rate of China’s completed housing area has remained high. As of November 2021, the year-on-year growth rate of China’s completed housing area has reached 16.2%. Under the background of continued strong demand, it is expected that the price of raw salt in China will remain high in the future.
2. The index of chemical products decreased slightly, and the price of PX increased significantly
In the past week, China’s chemical price index CCPI fell by about 0.7% compared with a week ago, in which PX prices rose significantly and butadiene fell significantly. In terms of PX, PX rose 9.4% in the past week. The rise of PX price is mainly affected by the rise of international crude oil price. Naphtha, the main raw material of PX, is petroleum extract. With the recent continuous rebound of international crude oil price, PX price also increases. In terms of butadiene, the price of butadiene fell 8.9% last week. The sharp decline in butadiene prices was mainly due to the abundant supply in China and the continuous decline in external prices.
3. International crude oil prices continued to rebound
Over the past week, crude oil prices continued to rebound. The settlement price of Brent crude oil’s main continuous futures rose 2.2% to US $77.8/barrel, and the settlement price of WTI crude oil’s main continuous futures rose 2.9% to US $75.2/barrel. The recent rapid rise in crude oil prices is mainly due to two reasons. First, with the increasing vaccination rate in European and American countries, market confidence has been boosted, which is expected to stimulate the recovery of oil demand. Secondly, the inventory level of American crude oil depots continued to decline. As of December 24, 2021, the commercial crude oil inventory in the United States was about 420 million barrels, a decrease of about 13.5% over the same period last year. The continuous decline of crude oil inventory in the United States has played a certain role in promoting the rise of crude oil prices.
Investment advice
Under the background of rising industrial raw salt and crude oil prices, enterprises with relevant capacity layout may benefit, such as Shan Dong Lubei Chemcal Co.Ltd(600727) , Jiangsu Eastern Shenghong Co.Ltd(000301) , Hengyi Petrochemical Co.Ltd(000703) .
Risk statement
Abnormal fluctuations in international oil prices, worsening of the international covid-19 epidemic, and upgrading of safety and environmental protection policies.
