Domestic chemical prices are expected to continue into 2017

China Paint Online News Information: This year,
prices of chemicals continued to strengthen, corporate earnings improved significantly. In particular, the recent sharp rise in the prices of many products has also raised concerns about the sustained high business climate. The outstanding performance is that the cyclical stock rise is much smaller than the corresponding product increase.
The judgment of the future business climate mainly has the following points:
is currently the most serious phase of supply and demand mismatch: the core logic of this year's rise lies in the demand improvement overlay supply contraction, but as prices continue to rise, there will inevitably be more high-cost production capacity in the future to choose to resume work, so we judge that the current time point is the most serious mismatch between supply and demand, the fastest price increase stage. It is also the highest month-on-month growth rate and the highest price of the year.
prices are expected to continue into next year: capacity release is a gradual process, and the gap between supply and demand will only narrow in the future and will not disappear any time soon.
will continue from the boom cycle: the current round of earnings improvement in the next few years is mainly used to pay off debt rather than expand production, so even if the boom highs appear, will not show the previous cycle of A-type reversal. The future price is generally around the cost line of high-cost marginal capacity shock, leading enterprises can still obtain stable profitability.
oil and coal prices are the key variables in the future business climate: the fall in coal prices next year is the main risk to future chemical prices. But since the share price basically does not reflect the current round of price increases, and we judge that most coal chemical companies next year the new earnings center will still rise significantly, so the risk of coal price decline cashed in, but is likely to become a catalyst for the rise in share prices. Rising oil prices, on the other hand, are likely to be the biggest positive catalyst for next year's chemical market.
sectors: we have issued a series of reports on the recovery of the cyclical boom this year, recommended PVC, soda, carbon black and acrylic, we still remain optimistic overall. However, it should be noted that the recent PVC price increase is too large, serious deviation from the marginal cost center, which will trigger the resumption of high-cost coastal capacity.
if coal prices fall, there is a greater risk of future price declines. But even if the corresponding decline in the earnings center, we judge that there is still a large room for corporate valuation repair, so the industry still maintain a positive.
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