Core view
1. The double carbon work continues to advance, and the urea boom may rise. Recently, urea prices have shown signs of stabilizing. According to the data of Baichuan Yingfu, the price of urea rose rapidly in the first three quarters of 2021. From January to October, the average price of urea market in China rose from 1767 yuan / ton to 3090 yuan / ton, reaching the highest price in recent three years, with an increase of 74.9%. Subsequently, due to the decline of coal price, the production cost of urea decreased, and the price of urea also decreased. Within one month, the price fell back to about 2400 yuan / ton. Since the beginning of 2022, the market price has gradually stabilized and increased. As of January 14, the average price in the Chinese market was 2575 yuan / ton. In the medium and long term, low carbon is imperative, and the new capacity of urea is limited. China’s urea production capacity has shown a downward trend in the past five years. In 2021, the effective capacity of urea in China decreased by 12.2% compared with 2017. In December 2021, the 14th five year plan for industrial green development issued by the Ministry of industry and information technology proposed to implement the “double control” goal of energy consumption and the control requirements of carbon emission intensity, and strictly control the new capacity of urea industry. According to the data of Baichuan Yingfu, only 1.2 million tons of urea will be added in China in 2022. In the short term, the inventory is in the middle, and the release of spring farming demand may push the market upward. In February 2020, the national urea inventory rose to 1274000 tons, the peak in recent three years. Then it dropped to the lowest point of 48000 tons. At present, it has rebounded to the median of 586000 tons in the past three years. With the coming spring ploughing season, the market demand for urea will increase, or it will promote the upward trend of urea market. Therefore, under the background of double carbon, the prosperity of urea industry may rise in the first half of 2022. On the one hand, new capacity is limited, and supply and demand maintain a tight balance. On the other hand, when the demand for spring ploughing is released, the market demand for urea will increase, which will contribute to the upward prosperity of the industry.
2. China’s chemical price index CCPI rose by 1.9%, of which the mainstream price of C4 butadiene market rose by 45.1% and light soda ash fell by 12.1%. Butadiene increased significantly last week. On the one hand, the market bet that Omicron has limited impact on global economic recovery, oil supply can not keep up with demand, prices continue to rise, and butadiene cost support is strong; On the other hand, the reduction of steam cracking unit in South Korea has led to tight spot supply of butadiene. In terms of soda ash, the main reason for the decline is that the overall industry inventory continues to be high and the shipping pressure remains, so the market price of soda ash continues to decline.
3. Last week, China’s coal price gradually stabilized, China Shipbuilding Industry Group Power Co.Ltd(600482) coal main continuous futures settlement price rose by 10.0%, and coking coal main continuous futures settlement price rose by 8.2%. After nearly two months of sharp decline, China’s coal industry has stabilized across the board. Although there is no change in the relationship between supply and demand in the current coal market, the procurement of enterprises will pick up with the downstream coal demand. In terms of thermal coal, the coal cost caused by the increase of railway freight rate has increased, and the price of thermal coal in the port has gradually stabilized. In terms of coking coal, affected by production restriction, the overall commencement is still low, the coke supply is slightly tight, and the procurement enthusiasm of downstream steel mills is not reduced.
4. Market review. Among the 31 Shenwan tertiary industries in the chemical industry, 23 sectors rose or remained flat last week, and 8 sectors fell. Among them, the sector with the largest increase was pesticides, with an increase of 7.3%; The largest decline was in polyurethane, down 6.0%. In terms of individual stocks, the top three weekly increases were Aba Chemicals Corporation(300261) , Xilong Scientific Co.Ltd(002584) , Phichem Corporation(300398) , with weekly increases of 81.5%, 42.4% and 29.2% respectively; The top three weekly declines were Yueyang Xingchang Petro-Chemical Co.Ltd(000819) , * ST Chengxing and cangge mining, with weekly declines of 20.7%, 17.0% and 10.4% respectively. In addition, last week, key companies in the chemical industry announced the expected disclosure date of the annual report, mainly from March 2 to April 30, 2022.
Investment advice
After the price of urea stabilizes and rises, relevant targets may benefit, such as Shandong Hualu-Hengsheng Chemical Co.Ltd(600426) , Luxi Chemical Group Co.Ltd(000830) , Hubei Yihua Chemical Industry Co.Ltd(000422) , etc.
Risk tips
The international covid-19 epidemic continues, the safety and environmental protection policy continues to be tightened, and the fluctuation of the energy market intensifies.
