Talk about the impact of the epidemic on the petro

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In terms of industry, logistics and investment, what impact has the epidemic had on the petrochemical supply chain

talk about the impact of the epidemic on the petrochemical supply chain in terms of industry, logistics and investment

april 27, 2020

although China's petrochemical supply chain is relatively complete at present, most of the product production and sales and main businesses are concentrated in China, and the proportion of international trade and transnational investment and financing is relatively small. In addition, China's petrochemical products are still relatively low-end, and the phenomena of overcapacity, homogeneous competition, high production costs and decreasing profit space year by year are normalized. The COVID-19 has brought new challenges to China's chemical industry, but it has also brought new opportunities to solve the inherent problems

2020 COVID-19 is the most serious public health emergency facing human society. The epidemic spreads rapidly, has a wide range of infection, and is difficult to prevent and control. It has brought very serious challenges to all countries in the world, and has had a far-reaching impact on public health, social economy, people to people governance, international exchanges, policies and regulations. The petrochemical industry, as the basic industry of the national economy, has also been greatly impacted

2019, the added value of China's petroleum and chemical industry increased by 4.8% year-on-year; The operating income was 12.27 trillion yuan, a year-on-year increase of 1.3%; The total profit was 668.37 billion yuan, a year-on-year decrease of 14.9%; The total import and export volume was 722.21 billion US dollars, a year-on-year decrease of 2.8%; The total output of crude oil and natural gas was 347million tons (oil equivalent), with a year-on-year increase of 4.7%; The total output of major chemicals increased by about 4.6% year-on-year

the growth of China's petrochemical industry is inseparable from the support of the mature supply chain system behind it. The logistics chain, information flow chain and capital flow chain have been modernized. Raw material suppliers, manufacturers, logistics providers, warehousing, distribution, channels, end consumption and other stakeholders and links have a set of smooth operation mechanisms

although China's petrochemical supply chain is relatively complete at present, the production and sales of petrochemical products are mainly concentrated in China, the proportion of international trade is relatively small, the reserves of overseas oil and gas fields are small, there are not many cross-border investment and financing projects, and there is a lack of international M & A projects. Most enterprises' business fields and geographical distribution are still dominated by China. In addition, China's petrochemical products are still relatively low-end and traditional, and the industry generally has such normalization phenomena as overcapacity, homogeneous competition, high production costs and decreasing profit space year by year

The COVID-19 has brought new challenges to China's chemical industry, but it has also brought new opportunities to solve the inherent problems

from the perspective of logistics

the logistics of the petrochemical industry is highly professional. The contents are basically hazardous chemicals, which are flammable, explosive, toxic and harmful. Under normal circumstances, the petrochemical industry has very strict logistics control. In China's petrochemical industry, the main body of logistics is private enterprises, accounting for about 80% of the total number of logistics enterprises. The enterprises are generally small in scale, and the main business income of less than 100million yuan also accounts for about 80%. The enterprises are mainly distributed in East China and along the Yangtze River (areas greatly affected by the epidemic). The epidemic has a great impact on the business in this region

in terms of international logistics, it was interrupted to a certain extent due to the impact of COVID-19. Air transportation is one of the key transportation modes for fragile, perishable or high-value goods. The interruption of air navigation will greatly affect the transportation and supply of chemicals and drugs

the chemical industry has never been suspended and the logistics is severely restricted, resulting in high overall inventory of enterprises in the industry. At present, liquid storage is on the verge of being full, and solid product storage is also over the line. Under this background, the overall logistics situation is still not optimistic, and it is difficult to recover in the short term

from the perspective of capital

the weekly change of enterprise capital is slow, cash flow pressure increases, accounts receivable increases, and sales are blocked

the slow capital turnover is mainly due to the combined effect of restricted personnel flow, blocked logistics transportation, increased difficulty in product sales, increased capital cost and other aspects. Blocked personnel flow makes the enterprise unable to carry out normal production and operation activities; Logistics obstruction makes it difficult for enterprises to obtain raw materials and complete product sales; The decline in overall social demand has led to a decrease in the demand for commodities produced by some enterprises, resulting in inventory hoarding, which has a great impact on products with service life; The increase in capital cost may be due to the company's own management expenses such as loans, accounts payable, personnel salaries and various taxes

at the same time, as it is difficult for enterprises to obtain operating income, recover payment for goods and withdraw funds, it will have a great impact on the cash flow of enterprises, or in serious cases, it may lead to the rupture of the enterprise's capital chain or even bankruptcy

from the perspective of industrial layout

as a basic industry of the national economy, the petrochemical industry will also be directly affected if there is industrial transfer or relocation in other industries

measures such as production stoppage, commodity logistics obstruction, personnel control and border control of various countries caused by the epidemic have caused great interference to the production and operation of enterprises. In this case, multinational corporations' confidence in the stability of China's industrial chain will be reduced. The principle of "not putting eggs in the same basket" may be one of the main factors considered by many multinational corporations in the future

in addition, the epidemic has made the world see the potential suppliers in the region or the surrounding regions after the successful launch of skin care solutions that can effectively isolate air pollution (PM2.5) for Asian market demand without Chinese commodity supply. Once the United States takes this opportunity to promote anti globalization, China's export will be greatly weakened

however, on the whole, although some enterprises intend to move their production lines to India, Thailand, Vietnam or neighboring countries, these countries are relatively small and have a low degree of industrialization, and the supply chain system they can support lags far behind China. At the same time, if the enterprises transferred to these countries have high demand for the upstream and downstream of the manufacturing supply chain, they still need to purchase from China, and it is difficult to completely get rid of the supply chain of China's manufacturing industry

from the perspective of energy consumption

the petrochemical industry is a major energy consumer and a direct supplier of energy. Once the downstream energy consumption is reduced to a large extent, it will directly affect the petrochemical industry

the most serious problems are the suspension of production, restriction of personnel mobility, suspension of schools, etc. people have greatly reduced the frequency of travel and use of cars, which directly led to a sharp decline of domestic refined oil consumption by at least 80% in February. The decline of refined oil consumption will affect the overall benefits of upstream refineries, resulting in the inability of enterprise products to sell, pressure on prices, rising inventory costs, rising cash flow pressure, and some enterprises will face difficulties in production and operation. Even if the demand recovers in the future, the recovery process of refined oil consumption will be relatively long

the overall decline in consumer services such as catering, culture and entertainment, transportation and clothing has led to a year-on-year decline of more than 40% in gasoline consumption, more than 30% in diesel consumption, more than 50% in aviation kerosene consumption and 10.2% in natural gas consumption. In areas where the epidemic is relatively mild, people's life-related energy industries such as pharmaceutical manufacturing and food processing industries are less affected, but other energy demand industries such as textile industry, rubber products industry, plastic products industry and polyester industry are relatively affected

however, since the middle of March, the domestic epidemic has been basically controlled, work and production have been gradually restored in various places, people's living order has also begun to return, and the total amount of social energy consumption has begun to recover. In the long run, with the gradual improvement of the epidemic situation and the lifting of restrictions on social production and life, the epidemic situation will not fundamentally change the general trend of stable and rising energy consumption in China

from the perspective of raw material supply and import

. From the perspective of natural gas and crude oil supply, China imports about 500million tons of crude oil every year, with an average of 10million barrels per day. It is expected that the oil price will remain low this year, so China's demand for crude oil imports can be basically solved. Natural gas is mainly composed of pipeline gas and LNG gas. At present, China's natural gas consumption exceeds 300billion cubic meters. The COVID-19 will reduce the natural gas consumption to a certain extent. In addition, China has rich natural gas import sources and stable channels, so it is not difficult to supply

secondly, the petrochemical industry basically uses natural gas and crude oil as raw materials. In the event of an outbreak, the supply of naphtha, liquefied petroleum gas and reformed oil (benzene, toluene and mixed xylene) from refineries will be reduced, which are necessary raw materials for the petrochemical industry

at the same time, in some sub sectors of the petrochemical industry, China has a high degree of dependence on foreign countries. The epidemic may increase the difficulty of importing these products for a period of time, and then affect the development of related industries. For example, China's dependence on polycarbonate imports is as high as 70%, which is a material widely used in automobile parts, consumer electronics, household appliances, medical equipment and other fields; The import dependence of PA66 reaches 54.2%, which is a kind of material with strong impact resistance and is used in mechanical manufacturing, automobile, electrical devices and other fields; The external dependence of polyethylene, acrylic acid and polymers also exceeds 40%. In addition, some high-end chemicals, fine chemicals and new chemical materials, such as polypropylene, aramid, propylene cyanogen, LCP, new high-grade polytetrafluoroethylene, fluororubber, polyvinylidene fluoride and other new fluoropolymers, mixed alkylbenzene and mixed alkylnaphthalene, are imported from abroad. Some catalysts, reaction reagents, culture media, antifreeze agents, hydraulic brake fluids and other products also need to be imported. The stability of these raw material sources will directly affect the production of related petrochemical products in China

from the perspective of product export

from the perspective of scale, organic chemicals and petroleum, petroleum products and related raw materials have the largest export amount. From the perspective of specific products, according to the data of the Federation, the products with an export proportion of more than 30% in 2019 mainly include rubber additives, titanium dioxide, polyurethane, dyes, phosphorus chemicals, fertilizers, etc. In particular, the export of accelerators, antioxidants, ammonium sulfate, diammonium phosphate and polymerized MDI accounts for a relatively high proportion, reaching more than 50%. From the perspective of enterprises, according to the 2018 annual report, 30 listed companies' overseas revenue accounted for more than 50% and 116 chemical listed companies' overseas revenue accounted for more than 20%, covering many sub industries such as pesticides, tires, chemical fiber, polyurethane, etc

products with a high proportion of China's exports

the current global supply chain is still a division of labor system around developed economies, and the export direction of China's chemical products is no exception. China's exports to the European Union and the United States of motors and their parts, textile clothing, furniture, sports goods, etc. accounted for 66.3% of the total exports to the two major economies. As the real economy weakens, the negative impact on China's manufacturing industry continues to deepen

if the epidemic continues to ferment, there will be a risk of disruption in the global supply chain, and the export of China's chemical products and their downstream products industry will decline significantly, resulting in fewer factory orders, idle labor, and increased pressure on the enterprise's labor cost and debt service burden, which will lead to insufficient production capacity and increase the risk of default, which will bring vital challenges to China's export-oriented enterprises

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