Chemical industry faces downward pressure on demand

According to statistics from the National Bureau of Statistics, China’s energy increased significantly in June, and the purchase prices of fuel power and chemical raw materials rose by 24.9% and 7.8% respectively year-on-year. The prices of chemical fiber, synthetic materials, plastic products and rubber products using petrochemical primary products as raw materials will increase as the price of upstream raw materials rises, and the cost increase will be transmitted to the entire industrial chain.
In addition, since the beginning of this year, major economies in the world have adopted tightening monetary policies to control inflation, thereby increasing the cost of funds. Under this background, due to the fact that most companies in China's chemical industry produce products with low technical barriers and limited profit-added value, the ability to shift downstream costs is weak, and companies will face greater cost pressures.
As the chemical industry itself is a highly cyclical industry, once the macroeconomic growth slows down, the expansionary expenditures will increase, the financing costs will increase, the product gross margin will decline, and sales will slow down. Under the background of the global economic slowdown and high oil prices, the chemical industry must first face the pressure of declining demand caused by the economic downturn.
The current decline in demand for synthetic rubber, chemical fiber and other products has gradually begun to show. As the price of oil rose, the demand of the US auto market dropped successively. In June, the overall North American auto market fell by 18.3%, the lowest sales volume in 10 years; GM, Ford, Toyota and other major international companies have now lowered their sales targets in the second half of the year. The auto industry does not The economy will directly lead to a decrease in consumption of synthetic rubber and the like for manufacturing tires and the like. In June, China’s textile and apparel export amounted to US$15.064 billion, which represented a year-on-year decrease of 4.64%, mainly due to exports of apparel and clothing accessories of US$9.31 billion, a year-on-year decrease of 15.76%. The downturn in petrochemical downstream industries and terminal industries will lead to low demand for raw materials.
In addition, various policies introduced by macroeconomic regulation have also exerted pressure on the development of the industry. Since last year, the country has exported a series of policies, including increasing the export tariffs on some resource products, continuously tightening monetary policy, and continuing to strengthen the implementation of energy-saving emission reduction policies. From April to May of this year, the country has successively introduced a policy of adding a special tariff of 100% on chemical fertilizers and phosphorus products. The export tax rate has been significantly raised, which has closed the export of fertilizer products in China to some extent.

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