The supply and demand pattern of organic silicon is improving, and the industry boom is steadily rising. The organic silicone industry has been in a downturn for many years, and some companies with poor profitability have permanently withdrawn. Momentive, the world’s second largest organic silicone company, filed for bankruptcy protection in 2014. Global production capacity has gradually shrunk, and there will be little new production capacity at home and abroad in the future. In addition, domestic environmental protection supervision has become stricter and gradually normalized, which has restricted the start of operation of some enterprises. However, downstream demand has grown steadily, and the industry’s supply and demand pattern has been greatly improved. Excluding long-term shutdowns and ineffective production capacity that cannot be started normally, as of the end of 2016, my country’s total effective production capacity of silicone monomers was approximately 2.3 million tons. In 2016, only a small amount of technologically transformed production capacity was put into production, and the annual output was approximately 1.7 million tons. The industry operating rate A year-on-year increase of about 10 percentage points, the industry boom is steadily rising.
Environmental protection regulations in the silicone industry are becoming stricter, and supply is expected to shrink further. The process of producing silicone monomers from methanol, hydrogen chloride and metallic silicon will discharge a large amount of wastewater and waste slurry, which is difficult to process. Stricter environmental protection supervision is an inevitable trend in the development of the domestic chemical industry. Most domestic silicone production companies are located in the more economically developed eastern regions. Since 2016, many companies have had production affected by environmental protection issues. We judge that environmental protection supervision will remain high-pressure in the future. situation, supply is expected to shrink further.
The price difference between silicone monomers and raw materials is gradually widening, and the profitability of the industry has increased significantly. Since the middle of 2016, the prices of metallic silicon and methanol, the main raw materials of organic silicon monomers, have gradually increased, providing strong support for the price increase of organic silicon. Due to environmental protection and loss reasons, the production capacity of the metallic silicon industry has shrunk. In 2016, the output dropped by 7% year-on-year. Prices have continued to rise since mid-2016 and are expected to remain high in the future. The price of methanol, another main raw material, is highly correlated with coal. Due to the large actual capacity reduction in the coal industry, we judge that methanol prices will remain relatively high, and raw material prices will continue to provide support for silicone prices.
Since mid-2016, the price of DMC (dimethylsiloxane mixed ring body, organic silicon mainly tracks price indicators, about 2 tons of monomer can generate 1 ton of DMC) has continued to rise. After the Spring Festival in 2017, East China The regional DMC price continues to rise by 1,000 yuan/ton to 19,500 yuan/ton. The latest price has risen to 20,000 yuan/ton, which is about 60% higher than the low of 12,500 yuan/ton in mid-2016. The current price difference between DMC and main raw materials is close to 9,500 yuan/ton, the price difference per ton has increased to about 4,500 yuan compared with the low point in mid-2016, and the industry’s profitability has increased significantly.
Highly recommend Xin’an Co., Ltd. (monomer production capacity is 280,000 tons, expanded to 310,000 tons in 2017), Sanyou Chemical (monomer production capacity is 200,000 tons), At the same time, it is recommended to pay attention to Xingfa Group (monomer production capacity of 180,000 tons) and Luxi Chemical Industry (monomer production capacity of 50,000 tons). For every 1,000 yuan/ton expansion in the DMC price difference (tax included), the four companies’ EPS will increase by 0.17, 0.05, 0.13, and 0.01 yuan respectively.
Risk Warning: Risks of intensifying competition in the industry and risks of significant fluctuations in raw material prices.
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