Polyurethane industry under the new normal
In 2016, the term “new normal” appeared frequently, and it is very consistent with the current economic situation. The so-called new normal is a state that is different from the past and relatively stable; it is a trend and it is irreversible.
The polyurethane industry is thinking about the development strategy under the “new normal” and wants to strategize to win the future. Some inevitable questions are already before us: Is government regulation alone useful for overcapacity? How to sell polyurethane raw materials now? To whom?
When the balance between demand and production capacity is out of balance, the “barometer” of production capacity warning changes, the government begins to worry, and companies become worried. For the government, it is urgent to control the sustainable development of the country’s economy and eliminate backward production capacity and “zombie companies”; for companies, the impact is on direct economic benefits, making every step difficult.
First question: Is government regulation alone useful for overcapacity?
Although China has been planning to “cut overcapacity” in 2016, in the context of supply-side reform and state-owned enterprise reform, Under the two-wheel drive, the overcapacity reduction by central enterprises has entered the “implementation stage”; however, “overcapacity reduction” has a long way to go, and no matter how strict the policy is, it will take time to support it. Therefore, the imbalance between supply and demand is the current state of the domestic polyurethane industry and will continue for a long time. It will improve under government regulation, but limitations still exist.
Second question: How are polyurethane raw materials sold now?
Excess production capacity means that for an immature industry, production technology is the core competitiveness; while for a fairly mature polyurethane raw material industry, it has no choice but to fall into a price war. .
“People at home want to escape, people from abroad want to rush in”
China has become a major producer of polyurethane and the second largest consumer market for polyurethane. China is the world’s factory for refrigerated containers, shoes and toys; secondly, China’s production of building materials, spandex, textiles, synthetic leather and automobiles ranks first in the world; at the same time, China’s urbanization process is accelerating, investment in high-speed railways is increasing, and environmentally friendly synthetic Demand for wood increases.
These seemingly gorgeous data have made China a “must compete” for the polyurethane market, which has also exacerbated the worry of “overcapacity”. Foreign companies have made substantial bets in China, investment enthusiasm continues, and more and more foreign companies are pouring in.
In contrast, domestic polyurethane companies have a relatively clear understanding of production demand and supply. Under loose monetary policies, China’s market demand is far behind production capacity. Rising. Many domestic companies plan to “escape” and focus on “exports” to allow foreign demand to consume excess production capacity.
Third question: To whom should I sell it?
The daily necessities market is the backbone of my country’s trade, but now it has lost its former glory. Seven major categories of labor-intensive products, including textiles, clothing, bags, shoes, toys, furniture, and plastic products, all performed weakly.
The continued depreciation of the RMB in 2016 provided a favorable environment for exports. With the rise of new low-cost processing plants in Southeast Asia, Vietnam, and the Philippines, polyurethane exports are facing new opportunities and more choices.
The export direction of polyurethane raw materials requires multi-faceted considerations. One is to migrate to countries with a large population base, and the other is to move to large manufacturing countries. Russia, Brazil, and India have very large population bases, while Southeast Asia and India remain the core exporters. Thailand, Indonesia and Vietnam are home appliance production bases. India’s refrigerator market has maintained steady growth, while Thailand and Indonesia have performed relatively flatly in recent years. Thailand, Indonesia, and Malaysia are the automobile production bases in Southeast Asia. As the economic growth of Thailand and Indonesia slows down, the automobile industry is not prosperous, while India maintains steady growth.
“Good companies choose profits and live there”
In addition to expanding cooperation in downstream applications, polyurethane raw material companies also need to export. How to choose the “profitable place” for exporting is particularly important and deserves careful consideration. India is a comparison of Chinese polyurethaneIndia is an ideal exporting country, and in recent years, India has become the country with the most anti-dumping trade cases against China. Recently, India launched another anti-dumping investigation into China’s TDI on October 5. It can be seen that trade relations are not as simple as the adjustment of supply and demand, but involve the regulation of national economic interests and policies. India and China are both labor-intensive countries, and they overlap heavily with China in many emerging manufacturing structures. As the European and American markets shrink, friendly cooperation is gradually moving towards commercial competition.
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