China is intensifying efforts to remove production capacity, speeding up the withdrawal of “zombie” enterprises, and establishing a sound withdrawal mechanism for backward production capacity. The petrochemical industry is an important part of the implementation of the capacity reduction policy.

From 2016 to 2017, China's State Council, Ministry of Environmental Protection and other departments issued a number of environmental protection policies and laws, of which the petrochemical industry is the focus of monitoring and rectification. It is estimated that with the rollout of the national environmental tax collection policy in 2018, environmental protection will be forced to become a new threshold for Chinese-made industries including chemical industry, and supply-side reforms are cooperating with chemical-related policies to accelerate the elimination of backward production capacity.

Due to the country’s adjustment of high-energy-consuming and highly polluting heavy chemical industry policies, the chlor-alkali chemical industry is facing the impact of overcapacity, energy conservation, and environmental protection. This has led to more intense competition among companies in the industry, and on the other hand The concentration of the chemical industry has been increased, and the elimination of outdated production capacity has helped the industry to increase the effective operating rate, optimize the allocation of resources, and increase the profitability of the industry.

Benefiting from the continuous deepening of supply-side reforms and upgrading of environmental protection regulations to enhance the market concentration of the chemical industry, chemical companies' profitability in 2017 has improved significantly. According to data released by the Industry Research Institute of Foresighted Industries in the “Fluid Market Industry Market Demand Forecasting and Investment Strategic Planning Analysis Report”, the basic chemical industry listed companies achieved a total operating income of 405.126 billion yuan in 2017, an increase of 25.52% year-on-year, and an operating profit of 209.833 billion yuan. , a year-on-year increase of 43.70%, a net profit of 168.556 billion yuan, a year-on-year increase of 39.23%, and an upward trend in the profitability of the chemical industry.
The overall operating profit margin of the industry was 5.18%, an increase of 14.60% over the same period of last year. The overall net sales margin was 4.16%, an increase of 10.93% over the same period last year. Soda ash, nitrogen fertilizer, and polyurethane profit increased significantly, and it is expected to continue the booming market in 2018. Benefited from the increase in raw material prices at the supply end, the prices of chemical products have increased significantly, and all 17 sub-sectors have realized revenue growth this year.
Among them, net profits of soda ash, nitrogen fertilizer, carbon black, and polyurethane sub-industries increased year-on-year; those of viscose, tires, compound fertilizers, chlor-alkali and modified plastics industries showed different degrees of decline. Affected by supply-side reforms and downstream demand, carbon black and nitrogen fertilizer industries have turned around. With the deepening of supply-side reforms, the supply and demand pattern of some sub-sectors has improved substantially, such as polyester, polyurethane, and chlor-alkali industries. The prosperity of 2018 is expected to continue.

In the long run, the leverage ratio has dropped significantly and the balance sheet has been continuously restored. In 2017, with the continuous improvement of the economic prosperity of the chemical industry and continuous improvement of corporate profits, the balance sheet of the industry was significantly restored, and the asset operating level was greatly improved. The turnover rate of total assets of carbon black, nitrogen fertilizer and polyurethane industry changed greatly compared with the same period of last year.

From the perspective of asset-liability ratio, the asset-liability ratio of the basic chemical industry in 2017 was 49.47%, a year-on-year decrease of 1.52 percentage points. In the sub-sector, the rate of decline in the debt ratio was greater for polyurethanes (-22.35%), nitrogen fertilizers (-11.12%), and soda ash (-8.35%). Construction-in-progress projects have been reduced year by year in recent years, new industry capacity has been reduced year by year, industry concentration has been further enhanced, and leading positions have been further consolidated.

From a long-term perspective, the growth rate of investment in the chemical industry has been declining year by year, the supply of new capacity has been limited, and with the normalization of domestic environmental pressure, the supply side is expected to continue to contract. At the same time, under the background of increasingly strict environmental protection, backward small and medium-sized production capacity has been closed, and some sub-sectors have improved their phenomenon of “bad money drives out good money”. With the increase in industry concentration, the market share of leading-edge enterprises has continued to expand, and the supply and demand structure of the industry will increase. Continue to improve.