Due to multiple equipment failures, Russia recently announced that the “Beixi-1” natural gas pipeline has completely stopped gas transmission. As an important source of energy supply in Europe, the closure of Beixi-1 has also made Europe, which originally had a large amount of natural gas reserves for winter. Countries were caught off guard, driving the price of oil and gas in Europe to further rise, causing the prices of some downstream products such as chemicals to rise simultaneously.
Affected by the news, the A-share chemical sector has continued to strengthen recently, and the concept of propylene oxide has risen sharply. It is understood that Europe’s propylene oxide production capacity accounts for 25% of the world‘s total. In the context of natural gas shortages and a substantial increase in costs in Europe, local chemical plants may be passively reduced in load.
It is understood that in recent years, my country’s propylene oxide production capacity has increased significantly, and China may usher in export substitution opportunities. Related companies are also planning to increase European supply, which brings good development expectations to related companies with propylene oxide production capacity, such as Binhua Co., Ltd. (601678) currently has an annual production capacity of 280,000 tons of propylene oxide, and is the largest supplier of propylene oxide and oilfield additives in the country.
European energy crisis hits chemical industry hard
Recently, Russia announced that since September 3, due to equipment failure, the transportation of the “North Stream No. 1” natural gas pipeline has been completely stopped. Nord Stream-1 is an important source of natural gas supply in Europe. The failure to restart the pipeline on time is a huge blow to European countries that are replenishing their natural gas inventories.
This year, Europe has faced a series of “natural disasters” and “man-made disasters”, which has made its own energy crisis continue to intensify. In addition to the sudden “stop of gas” in Russia, as well as this summer’s high temperature and dry weather, some important European shipping routes such as the Rhine River have been left behind. The water level has dropped significantly, and the low water level has brought severe challenges to the transportation of various raw materials. In addition, the epic heatwave has significantly affected nuclear power output in many parts of Europe, exacerbating power shortages.
At present, the energy supply in Europe can be said to be difficult at home and abroad. Against the background of increasing difficulties in coal energy transportation and insufficient nuclear power generation, the demand for natural gas, which is the only hope in the power sector, has grown significantly. However, this time Russia’s “cut of gas” is driving the outbreak of the European natural gas crisis. .
Guotai Junan Futures believes that if the gas supply of Beixi No. 1 remains low, Europe may face a crisis of inventory depletion after entering winter. Under such circumstances, the market is increasingly worried about the lack of gas in winter, and the price of natural gas in Europe is easy to rise and hard to fall. . Recently, the price of natural gas in Europe once reached a record 321 euros / MWh.
In addition to causing hardships for Europeans, the lack of natural gas supply is also impacting the European chemical industry. At present, many factories have announced production cuts. According to statistics, Europe is the second largest chemical production base in the world, involving the supply of many important chemical products in the industrial chain.
Propylene oxide exports may bring about a turnaround
The energy crisis in Europe and the far-reaching impact it has caused have also attracted the attention and interpretation of many market participants. GF Securities believes that the sharp rise in natural gas prices in Europe will support the global price of related chemicals, and the risk of production shutdown will also affect the supply of related chemicals. For example, for the important chemical propylene oxide, Europe’s production capacity accounts for 25% of the world‘s total. Under the energy crisis, the global supply and demand of energy-intensive propylene oxide will undergo important changes.
At present, this trend of “lack of production capacity + price increase” has also hit the A-share market. In the past few days, some important chemical sectors of A-shares have risen sharply. For example, the above-mentioned propylene oxide sector, after a slight rise in the previous two consecutive days, the propylene oxide index rose sharply by 6.79% on September 6.
It is understood that propylene oxide is an important basic chemical raw material, which is the raw material of polyether polyol, propylene glycol, and dimethyl carbonate. The end consumer products are white goods packaging and soft furniture protection materials. According to the industry data of Longzhong Information, the production and sales of propylene oxide will be booming in 2021, and the average profit of products during the year will reach 35%. Therefore, large domestic chemical enterprises with relevant production capacity bases will add a large amount of propylene oxide production capacity in 2022.
Industry insiders believe that with the sharp reduction of propylene oxide production in Europe caused by the energy crisis and the growth of domestic propylene oxide production, my country is expected to change from a net importer to a net exporter, and domestic enterprises will also usher in export substitution. Chance. In fact, since the beginning of August, the international price of propylene oxide has risen from 8,000 yuan/ton to over 10,000 yuan/ton, and the price is expected to rise further.
From the perspective of supply, the operating rate of domestic propylene oxide is still relatively low. Some industry sources said that the current low operating rate is mainly due to the sluggish overall trend of the industry. Although the “Golden Nine Silver Ten” will briefly usher in the peak downstream demand season, the pressure to put new production capacity into production at the end of October is relatively high. At present, most of the industry is bearish about the propylene oxide market in the fourth quarter. However, the European energy crisis may bring about a demand turnaround for my country’s propylene oxide exports and new orders in the future.
Propylene oxide “leader” attracts market attention
Kaiyuan Securities believes that the production reduction caused by the European energy crisis may promote the propylene oxide industry to enter an upward cycle. In this context, my country’s stable chemical industry chain’s ability to supply the world is expected to be highlighted again. As far as propylene oxide is concerned, Binhua, a leading enterprise in the chlorohydrin method, deserves attention.
According to public information, Binhua Co., Ltd. is an old-fashioned chemical company that established a factory in 1968. In February 2010, Binhua shares were listed on the Shanghai Stock Exchange. The company is currently an important manufacturer of propylene oxide and caustic soda products and a supplier of trichloroethylene and oilfield additives in China. It currently has an annual production capacity of 280,000 tons of propylene oxide.
According to the semi-annual report released by Binhua, in the first half of 2022, the company achieved operating income of 4.540 billion yuan, a year-on-year increase of 5.11%; net profit attributable to shareholders of the listed company was 688 million yuan, a year-on-year decrease of 29.66%. Although the net profit has declined year-on-year, some market analysts believe that the net profit in the first half of the year has declined to a certain extent, which is mostly caused by the price fluctuations brought about by the cycle, and the fundamentals of the company are still improving.
In fact, the net profit of 688 million yuan in the first half of this year has exceeded the net profit of most years in the history of Binhua. The reason for the decline is because 2021 is an extremely rare boom year for the chemical industry, and most chemicals are operating at a high level. On this high base, if you want to continue the rapid growth this year, it will be difficult for most companies. It can be said that it is more difficult.
However, in response to the cyclical characteristics of chemical products, Binhua is also increasing investment in technology and extending to the terminal. By extending the industrial chain, risks are transferred to the rear and the ability to resist risks is increased. In the 2022 semi-annual report, Binhua disclosed that the company’s chlor-alkali sector has planned three strategic sectors: basic chemical base, Zhanhua, and Indonesia. In the next five years, caustic soda and propylene oxide plan to form a whole industrial chain of “original salt + caustic soda + chlorine products + polyether + bromine”.
In the highly competitive chlor-alkali industry, Binhua has built a series of supporting devices for propylene oxide, trichloroethylene, propylene chloride, epichlorohydrin, granular caustic soda and flake caustic soda in recent years, forming a unique green circular economy integration The transformation model embodies the concept of “eat the dry and squeeze the net”, creating the unique advantages of Binhua Co., Ltd.
In addition, in order to establish a comparative advantage in the industry, the company attaches great importance to the support of technology research and development. On August 29, Binhua Co., Ltd. established a strategic cooperation with the Dalian Institute of Chemical Physics, Chinese Academy of Sciences. The two parties will cooperate in the fields of energy and chemical industry, new energy, new materials, etc., to empower the development of Binhua’s projects, and to further consolidate and expand their comparative advantages.
Some institutions said that with the large-scale shutdown of propylene oxide production capacity caused by the European energy crisis, relevant domestic enterprises are ushering in excellent export substitution opportunities. As a domestic manufacturer with real core production capacity of propylene oxide, Binhua Co., Ltd. deserves the continuous attention of market participants.Return to Sohu, see more
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