Chemical industry supply side reform began in 2014. In 2009, motivated by four trillion, the chemical industry ushered in the capacity expansion cycle. CITIC Securities thought that in chemical industry, restocking in the cycle on their own initiative was expected to push up the product price.

Continuous Power of Supply Side Reform

In 2014, the chemical industry industry reached a peak, the industry’s situation of serious excess makes the chemical industry profitability kept at the lowest point in history 2013; weak profitability and heavy environmental pressure leaded to  obvious contraction of the industry supply side. In 2016, many products had negative growth in product capacity, and some products whose capacities were backward mostly stay out of the industry. the industry’s inflection point has appeared in 2016. The improvement of industry profitability will become a clear trend, and partial products will be expected to achieve dramatic reversal to achieve profitability.

In 2016, although domestic product prices have risen, but the level of inventory within the industry had a further decline compared with 2015. The growth rate of inventory in 2016 was close to the lowest point in 2009. According to the previous law, after the inventory bottomed out, the product’s gross margin would begin to rebound. although the chemical industry’s gross margin level has rebounded in 2016, it still stays in a relatively lower level, and there is still some space for it to rise. However, currently, restricted to the factors like environmental protection, transportation and others, capacity utilization is limited, the situation that some products demand exceeds supply will continue.

Restocking and Raising the Product Prices

Inventory has a great influence on disturbing the chemical product prices. Since 2014, industry inventory has been divided into three stages:

From 2014 to 2015, it is the stage to remove the stock. The stock is controlled in a lower limit within reasonable interval to keep the normal running. 2016 is the year to restock passively. Partial chemical products prices get a rise, and the stock of participants in the industry didnt get the sufficient promotion. The fast-rising prices suppressed the wish to restock. 2017 will be the stage to take the initiative to restock. ” stage. It is difficult to relieve sufficiently the tension of the source of goods in the short term. The stock of enterprises will be kept at a lower point. The improvement of demand edge will bring the increasing wish to restock actively.

 It is predicted that product prices will usher in the the rising period, and the level of enterprise profitability will continue to be promoted., and finally will come into the period of performance release.