Brief Analysis of Development of Chemical Industry in the First Half of 2016

From January to June this year, the country’s total output of major chemical products increased by approximately 4.0%, a year-on-year decrease of 0.7 percentage points. Among them, the total fertilizer output (refrigeration) was 37,192,000 tons, an increase of 1.4%; ** The output was 47.13 million tons, which was flat year-on-year; the output of caustic soda was 16.185 million tons, an increase of 6.4%; the output of polysilicon was 139,000 tons, an increase of 22.2%; the output of ethylene was 919.7 10,000 tons, an increase of 8.8%; ** output of 4.110 million tons, an increase of 4.2%; methanol production of 21.137 million tons, an increase of 8.0%; synthetic material production of 70.192 million tons, an increase of 7.0%. In the first half of the year, the output of tires was 457 million, an increase of 9.1% year-on-year.

In the export trade, the total export value of rubber products was 21 billion US dollars, a year-on-year decrease of 9.2%, accounting for 25.6% of the total exports of the petroleum and chemical industries; and the export and volume of chemical fertilizers were 12.534 million tons (in kind) and 3.05 billion US dollars, respectively, down by 24.7%. % and 39.2%.

From January to June, the profit margin of the chemical industry's main business was 5.37%, up 0.47 points year-on-year, but 0.31 points lower than the national industry of the same period; the main business income cost per 100 yuan was 86.96 yuan, a year-on-year decrease of 0.46 yuan, also higher than the same period The average national main industry revenue cost is 1.17 yuan. In the first half of the year, the inventory turnover days for finished goods in the chemical industry were 14.6 days; the average payback period for accounts receivable was 28.4 days. The loss of the industry was 16.0%, which was the same as that of the same period of last year.

International Industry Overview

On September 26th, the US Chemical Weekly 2016 global chemical billion-dollar club ranking was released. BASF re-listed first. Sinopec, ranked first last year, retreated to second place. Last year, BASF ranked first for eight consecutive years. Statistics show that, as a result of the drop in oil prices, about 56% of chemical companies listed on the list have decreased their sales revenue in US dollars. This is mainly due to the decline in the prices of many chemical products in 2015 plus the depreciation of some currencies.

A total of 106 chemical companies were included in the 2016 global chemical billion dollar club. The largest number is the United States, a total of 35; Japan 19, Germany 9. China's six companies are listed on the list, namely Sinopec, North Huajin Chemical, Hengyi Petrochemical, Sinochem Group, Wanhua Chemical, Formosa Plastics Group (Taiwan).

BASF's chemical sales amounted to approximately 59.3 billion U.S. dollars this year, Sinopec was followed by 50.3 billion U.S. dollars, and Dow Chemical ranked third with 48.8 billion U.S. dollars. Ranked fourth to sixth were ExxonMobil, SABIC and Formosa Plastics, which were in line with the previous year.

Significant decline in sales revenue

Although the ranking of chemical companies was relatively stable compared with the previous year, sales revenue dropped sharply. In the previous year, there were 6 chemical companies with annual sales revenue of more than US$50 billion. This year, only BASF and Sinopec Corp. were involved. Overall, the average revenue of the 106 corporate chemicals on the list dropped by 4% from the previous year to $108.

In particular, the top-ranking companies saw a greater drop in sales, with only Mitsubishi Chemical and Ineos sales growth in the top 10 companies showing a year-on-year increase, with 6 sales falling by 20% or more. However, the profitability of these companies continues to grow. From the data point of view, 74% of the company’s profits have grown, and the operating profit margin of the listed companies has averaged 12.3%. It should be noted that several companies with a large number of chemical operations did not provide chemical sales revenue, including China National Chemical Corporation, Koch Industries and PetroChina, and therefore are not on the list.

American companies have higher profits

By region, the world’s largest chemical manufacturer once again returned to Europe, the Middle East and Africa (EMEA) this year. In the EMEA region, the average sales of 34 companies were US$12.7 billion, a drop of 2% from the previous year; the presence of European diversified chemical giants such as BASF and Ineos, as well as some major petrochemical producers, including SABIC and oil giant Shell, Total Chemicals Business, etc.

However, from the perspective of earnings data, chemical companies in the Americas are even better. The operating profit margins of the 40 American chemical companies listed on the list averaged 15%, the highest in all regions. American companies include chemical giants such as Dow Chemical and ExxonMobil, as well as a number of medium-sized diversified and specialty chemical producers. This year, the average sales of American companies were 10.1 billion U.S. dollars.

Although profits of chemical companies in the Asia-Pacific region increased over the previous year, their operating profit margin was only 7.8%, and profitability was significantly lower than that of companies in the Americas and EMEA. In addition, the size of companies in the Asia-Pacific region is slightly smaller than in other regions. The average sales volume of chemical companies in 35 Asia-Pacific regions is 9.9 billion US dollars. Major companies in the Asia Pacific region include Sinopec and Formosa Plastics, as well as some Japanese producers.

Uncertainty still exists

The chaotic business conditions have become the norm in the chemical industry, and 2015 is no exception. This trend will continue in 2016. Kurt Bock, chairman of BASF, said in a letter to shareholders this year: “We are in the most turbulent period in decades.” Boke pointed out that oil prices in 2015 averaged 52 US dollars per barrel, only for 2014. Half the level. The slump in oil prices not only indicates an oversupply of oil, but also illustrates the slowdown in global economic growth from another aspect, especially in emerging market regions.

In 2015, China's GDP growth rate was 6.9%, which was lower than the 7.4% in 2014, the lowest growth rate in 25 years. “In 2015, we can mark the year when the global economic recovery is weak, China's economic growth slows down, global oil prices hit a record low, and China's oil and chemical products demand is weak.” Wang Yupu, chairman of Sinopec, made a statement to shareholders in late March of this year. The letter said.

M&A accelerates industry consolidation

Industry sources said that the next one to two years of global chemical industry mergers and acquisitions will accelerate, and may even reshape the big companies in the industry rankings. For example, combining Dow Chemical's and DuPont's sales revenue in 2015 will be the top spot in the rankings, and the combined company’s sales will be approximately US$74 billion; Bayer’s merger with Bayer due to the withdrawal of Covestro’s business from this year’s rankings. After sales revenue of about 28 billion US dollars, Bayer will return to the list accordingly. In addition, the merger of Jiayang Company and Canadian Fertilizer Company will also enter the top 10 global chemical companies.

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