In order to tackle air pollution prevention and control and win the blue sky defense war, the restricted areas of high emission industries are no longer limited to Beijing, Tianjin and Hebei and the surrounding areas, but also include one city, three provinces in the Yangtze River Delta and Fenwei plain.
Recently, Jiangsu, Shandong, Zhejiang, Tianjin, Guangdong, Shanxi and other places have issued remediation plans for chemical enterprises, and the number of cities involved will increase from the previous "2 + 26" to 80. Industry insiders believe that this also means that a new round of reshuffle of the chemical industry will begin in the second half of 2018.
Will the escalation of the environmental storm set off a surge in the price of chemicals?
Environmental protection has become an important variable at the supply side
In order to win the blue sky defense war, since 2018, many places across the country have successively introduced a variety of legal systems against environmental pollution, which not only covers a wider range, but also has stricter accountability measures in the future.
Tian Weiyong, director of the Environmental Supervision Bureau of the Ministry of ecological environment, said at the end of June that the scope of this round of supervision was wider, expanding from 28 cities in Beijing, Tianjin and Hebei and the surrounding areas to 80 cities. The Ministry of ecological environment will also conduct listing supervision or public interviews for cities with concentrated environmental violations of industrial enterprises, ineffective promotion of air pollution prevention and control, inadequate implementation of responsibilities and prominent air pollution problems, so as to seriously quantify accountability.
"Under the new normal of economic development, environmental protection has become an important variable affecting the supply side of the chemical industry." Xu Liuming and Deng Xianhe, analysts of industrial securities, said that with the introduction of the judicial interpretation of the "two Supreme People's congresses" on criminal cases of environmental pollution and the implementation of various environmental protection policies and bills, domestic environmental protection and safety requirements have been continuously improved and local governance and implementation efforts have been strengthened.
Some enterprises reduce production and stop production due to environmental protection failure or difficult to bear the increase of treatment cost in production, which has a great impact on the supply side and demand side of the industry. With the subsequent strengthening of environmental governance by government departments, the tightening of illegal supervision and the continuous improvement of enterprises' attention to cleaner production, the chemical industry is expected to accelerate the elimination of backward energy consumption.
"In fact, the environmental protection storm in the domestic chemical industry started last year and gradually strengthened in February this year. The first is the first round of Environmental Protection Supervision held by the Ministry of ecology and environment on February 7. Looking back, we carried out key supervision on the locations of five supervision centers in East China, South China, northwest, northeast and southwest." Xu Jing, a researcher of Meierya futures chemical industry, said.
"Domestic environmental protection inspection has been normalized since 2016," said Huang Liqiang, an analyst at Jinshi futures On the one hand, environmental protection inspection is an act of protecting the environment because the pollution is becoming more and more serious due to the unqualified emission of enterprises; On the other hand, it can also be regarded as a kind of supply side reform behavior to raise the business threshold and eliminate small and medium-sized substandard enterprises.
Small and medium-sized enterprises frustrated
It is worth mentioning that this round of environmental protection supervision focuses on avoiding "one size fits all", but resolutely "one size fits all" for illegal enterprises.
"This transformation has made great progress compared with the early stage, distinguishing different types of large and small factories. Some small factories in the downstream have reduced the production units or stopped work for rectification due to the non-compliance of sewage discharge, while the supervision of large factories has not been affected due to the overall compliance of environmental protection, and the operating rate of some factories has been maintained at about 90%." Xu Jing said.
Huang Liqiang also said: "due to the normalization and deepening of environmental protection inspection, the production of domestic small and medium-sized chemical enterprises has been greatly affected. Among them, coal chemical enterprises are the ones with greater pollution. Therefore, PVC, methanol, urea and ethylene glycol enterprises will be affected."
"The impact of environmental protection policies on chemicals is mainly reflected in three dimensions: one is to promote supply side reform - eliminate backward production capacity; the other is to limit the operating rate of devices upstream and downstream of the industrial chain; the third is to trigger the transfer of downstream orders." Xu Jing said.
Xu Jing further said that the impact of environmental protection policies is closely related to the characteristics of the chemical industry. For the oil and chemical industry chain, the middle and upper reaches are dominated by two barrels of oil or large private enterprises, most of which are relatively standardized and are not affected by environmental factors; For the coal chemical industry chain, the coal industry is mostly the main force subject to environmental protection, and the elimination of backward upstream production capacity is the effect of supply side reform promoted by environmental protection; The downstream of the chemical industry is mostly fully competitive enterprises, which are particularly affected by environmental protection due to the characteristics of small, scattered and chaotic. "Plastic weaving enterprises downstream of PP, weaving industry downstream of PTA, printing and dyeing industry, calcium carbide industry upstream of PVC and asphalt are the key varieties affected."
Taking PVC and methanol as an example, Huang Liqiang said that the upstream calcium carbide production of PVC is concentrated in the northwest, so it will be affected by environmental protection every winter. In addition, as the state has increased the requirements for mercury medium emission, small and medium-sized enterprises must upgrade their own equipment, but this is unbearable for small and medium-sized enterprises. Therefore, in fact, the introduction of environmental protection inspection policy has accelerated the clearing of production capacity; The coke oven gas production capacity of methanol is concentrated in Shandong, Shanxi and other places. These areas are key areas of environmental protection inspection. Therefore, the coke oven gas production capacity is also greatly affected by environmental protection.
From the perspective of industrial development, Xu Liuming and Deng Xianhe said that after years of downturn, although the investment willingness of the chemical industry gradually began to recover, under the general situation of stricter environmental protection supervision, the resumption of small and medium-sized production capacity and the release of new production capacity were further restricted, and the total amount of construction in progress of the industry just began to change from negative to positive after 10 consecutive quarters of negative growth, Considering the continuous withdrawal of some inefficient production capacity in the early stage and the concentration of capital expenditure to leading companies, the release of production capacity will be more orderly in the future.
It depends on the "face" of the terminal market
In fact, before that, there had been three large-scale renovations in the chemical industry in recent years.
According to Xu Jing, in 2015 and 2016, the environmental protection renovation of PVC upstream calcium carbide industry eliminated some backward production capacity, making the PVC industry chain gradually enter the period of low-speed production capacity from the cycle of excess production capacity. From last year to this year, the shutdown of water jet looms in various regions also made the downstream cloth difficult to find. Then, the downstream regulation of polyolefins has shifted orders from small plants to large plants, standardizing the whole market behavior.
From the perspective of the overall commodity market, Huang Liqiang said that at present, the continuous rise of domestic commodity prices is affected by external disturbance factors and the rise of import prices due to the devaluation of the RMB on the one hand, and inflation expectations on the other hand. In this case, the general trend of domestic chemicals will still be upward. Environmental protection and production restriction will contribute to the price of chemicals, or expand the increase of commodities, which is of great help to improve the business situation of enterprises, accelerate industrial integration, promote industrial concentration, and enhance the competitiveness of enterprises.
Xu Jing believes that at the advent of a new round of reshuffle in the chemical industry, environmental protection factors are not the leading factor. The low inventory and weak demand in the off-season of most chemicals have become the main driver of the price rise.
"However, at present, there are doubts about whether the domestic terminal market can bear the continuous rise of chemical product prices. In this case, once the terminal market does not follow up, the rise of industrial product prices will be difficult to continue." Li Qiang said.
In terms of a shares, Xu Liuming and Deng Xianhe suggested focusing on four main investment lines: first, some industry leaders with prominent advantages in industrial chain integration, cost and environmental protection, and are expected to continue to grow steadily with the release of production capacity and the production of new products; Second, the private refining industry with large-scale new units, leading technology and high degree of integration; Third, under the supply side reform, the boom continues to rise in the fine molecule industry; Fourth, high-quality assets with broad development space and relatively certain performance growth under the industrial trend.