The New Challenge of Chemical Industry

In the first quarter of 2023, the prices of domestic chemical products fluctuated significantly. The new production capacity continues to be released, and the chemical industry is facing a new round of supply-demand imbalance challenges due to the overall demand impact.

With the high international crude oil prices, the differentiation of upstream and downstream benefits has significantly increased, and the efficiency of oil and gas extraction has increased significantly. However, the cost of the downstream chemical industry has significantly increased. Currently, the domestic chemical industry faces the challenge of continuously releasing new production capacity but overall demand is lower than expected.

According to data from Zhuochuang Information, the average domestic chemical price index in the first quarter of this year was 1350.3, a decrease of 12% compared to the same period last year. Under the influence of supply and demand contradictions, the overall decline in the chemical market is relatively significant.

In terms of the polyolefin market, this year's weak external demand, unstable domestic demand, and supply expansion pattern have left the market still facing significant pressure in the second quarter. In the future, close attention needs to be paid to maintenance and production reduction actions at the supply end Zhang Chi, an analyst in the chemical industry of Guotai Jun'an Futures, believes that under the pressure of low profits and strong costs in the chemical industry, there may be a possibility of further increase in costs in the second half of the year. The market's choice may be to either reduce production or bear greater losses.

For both chemical production and trading enterprises, there are two major inventory risks: one is the inventory risk of raw materials, and the other is the inventory risk of products. To avoid the operation of the two major inventory risks, the main solution is to hedge in futures. "said Ge Rui, Deputy General Manager of Zhejiang Hengyi International Trading Company.

In the context of imbalanced supply and demand in the market, the enthusiasm of enterprises to participate in the chemical market is soaring. In 2022, the delivery volume of chemical futures at Daishang Exchange reached a record high of 1.21 million tons, and the enthusiasm of enterprises to participate in delivery has significantly increased. At the same time, the over-the-counter business transactions in the chemical industry sector are active: in 2022, the over-the-counter transactions reached nearly 33 billion yuan, a year-on-year increase of 57%, strongly supporting chemical enterprises to use cash to combine business management risks and stabilize supply and sales; In 2022, the daily average holdings of industrial enterprises participating in the chemical futures market of Dashangsuo reached 1.2 million, a year-on-year increase of 41%.