Key Focus of Basic Chemicals

Core assets (Wanhua Chemical, Hualu Hengsheng, Yangnong Chemical, Xinhecheng); Titanium Dioxide (Longbai Group), Carbon Fiber (Guangwei Composite Materials), Zeolite/OLED (Wanrun Co., Ltd.), Pesticides (Yangnong Chemical, Guangxin Co., Ltd.), Compound Fertilizer (Xinyangfeng), etc.

Key Focus of Petrochemicals

OPEC+ joint production cuts have formed support for oil prices; however, attention still needs to be paid to non-OPEC production (Canadian heavy oil, Brazil, Central Asia) and the impact of further fermentation of global macroeconomic downturn risks and trade risks on oil prices. It is recommended to accelerate the integration of the polyester industry chain and enter the excellent private refining and petrochemical companies specializing in large-scale refining and the layout of C2/C3 light hydrocarbon cracking (Rongsheng Petrochemical, Dongfang Shenghong, Satellite Chemistry, Tongkun Co., Ltd., Hengli Petrochemical); pay attention to Baofeng Energy.

Weekly Industry Updates

This week, the chemical price index remained unchanged, with a decline in core raw material prices, LPG gas prices, and LNG gas prices, and an increase in coal prices; prices of C4, C5, polyurethane, and fluorine chemical products rose. This week, China's chemical product price index (CCPI) remained stable; Brent crude oil prices fell by 3.7%, imported LPG by 2.2%, domestic LNG gas by 18.3%, and bituminous coal by 0.3%.

On the raw material side, prices of some C4 and C5 products rose, while prices of some C1 products fell; on the finished product side, prices of polyurethane and fluorine chemical products rose, while prices of fertilizers, phosphorus chemicals, pesticides, rubber, and vitamins fell.

Oil prices fell this week, economic growth concerns escalated, and expectations of the Federal Reserve's hawkish policy dampened risk appetite.

This week, the settlement price of Brent crude oil fell from $84.8 to $81.6 per barrel (a decrease of 3.7%), and the settlement price of WTI crude oil fell from $78.2 to $75.7 per barrel (a decrease of 3.1%); US commercial crude oil inventories were 479 million barrels (a decrease of 0.4% compared to the previous week), and the number of US crude oil rigs was 590 (a decrease of 0.3% compared to the previous week). On the supply side, according to Longzhong Information, the OPEC+ production control policy has not changed in the short term, and Russia has been reducing production by 500,000 barrels per day since March. Europe continues to reduce oil purchases from Russia, and US crude oil production is still growing slowly. On the demand side, according to Longzhong Information, although recent global economic data has performed better than expected, European and American countries continue to tighten monetary policies, causing concerns about the economic outlook to persist. On the other hand, the Chinese economy and demand outlook are improving, and US commercial crude oil inventories have decreased for the first time in 11 weeks, easing inventory pressure. From a policy perspective, according to Longzhong Information, the Federal Reserve will hold a monetary policy meeting on March 21-22 and announce an interest rate hike decision. The latest statement by the Federal Reserve Chairman has set the tone for the next interest rate meeting, and the probability of a 50 basis point interest rate hike in March has risen to 77.9%. From a geopolitical perspective, according to Longzhong Information, the recent escalation of the
trade tensions between Russia and Europe has raised concerns about the stability of oil supply. Additionally, the ongoing uncertainty surrounding the global economic outlook has dampened risk appetite and contributed to the decline in oil prices.

Looking ahead, it is important to monitor the developments in non-OPEC production, particularly in regions like Canada, Brazil, and Central Asia. The integration of the polyester industry chain and the expansion into private refining and petrochemical companies specializing in large-scale refining and light hydrocarbon cracking should be prioritized. Notable companies in this sector include Rongsheng Petrochemical, Dongfang Shenghong, Satellite Chemistry, Tongkun Co., Ltd., Hengli Petrochemical, and Baofeng Energy.

In terms of the chemical industry, the price index remained stable this week, with some fluctuations in raw material and finished product prices. Core raw material prices, LPG gas prices, and LNG gas prices declined, while coal prices increased. On the other hand, prices of C4, C5, polyurethane, and fluorine chemical products rose. It is worth noting that prices of fertilizers, phosphorus chemicals, pesticides, rubber, and vitamins experienced a decline.

The decrease in oil prices can be attributed to growing concerns about economic growth, as well as expectations of a hawkish policy stance from the Federal Reserve. Brent crude oil prices fell by 3.7%, settling at $81.6 per barrel, while WTI crude oil prices dropped by 3.1%, settling at $75.7 per barrel. The US commercial crude oil inventories decreased by 0.4% compared to the previous week, reaching 479 million barrels. Additionally, the number of US crude oil rigs declined by 0.3% to 590.

Supply-wise, the OPEC+ production control policy remains unchanged in the short term, with Russia reducing production by 500,000 barrels per day since March. Europe's reduced oil purchases from Russia and the slow growth of US crude oil production also impact the supply dynamics. On the demand side, while recent global economic data has performed better than expected, tightening monetary policies in European and American countries continue to raise concerns about the economic outlook. However, the Chinese economy and demand outlook are improving, and the reduction in US commercial crude oil inventories after 11 consecutive weeks of growth is relieving some inventory pressure.

It is important to keep an eye on the upcoming monetary policy meeting of the Federal Reserve, where an interest rate hike decision is expected to be announced. The recent statement by the Federal Reserve Chairman has increased the probability of a 50 basis point interest rate hike in March to 77.9%. Geopolitically, the trade tensions between Russia and Europe pose a potential risk to oil supply stability.

Overall, staying informed about these market dynamics and developments will be crucial for decision-making within the chemical and petrochemical industries.