The impact of the decline in oil prices on  the Plastic bottle manufacturers

   As a chemical price hub, weak oil prices have a negative impact on most chemical sub-sectors. However, if viewed from the downstream end, in the medium term, it will benefit some downstream sub-industries that are expected to be good or stable, such as modified plastics, coatings, and additives. The largest downstream consumption of modified plastics is the home appliance industry and the automotive industry, whose profitability is more sensitive to cost fluctuations. Since the beginning of the year, the prices of its main raw materials have continued to fall, and the gross profit margin of modified materials has continued to rise.

The impact of falling oil prices on the chemical sub-sectors is now divided

As a chemical price hub, weaker oil prices have a negative impact on most of the chemical sub-sectors. The price of chemical products may be short-term or under pressure. Huatai Securities research believes that in the medium term, some downstream sub-sectors that are expected to be good or stable are expected to benefit or stabilize Modified plastics, coatings, additives, etc.

According to public information, statistics as of September 2019 show that overall, the sub-sectors of the basic chemical industry performed differently year-on-year. From the perspective of operating income, the operating income of chlor-alkali, potash fertilizer, polyester, and paint coating panels has reached 10% The above growth, but the compound fertilizer sector has dropped significantly by 24.27%; from the net profit of the mother, the potash fertilizer and the silicone sector have increased significantly by 67.05% and 56.54%; nitrogen fertilizers, plastic products and soda ash have fallen by more than 50%.

Among them, the price of plastics (PP, PS, ABS, etc.), synthetic rubber and other products are at historically low levels while oil prices have fallen to low levels and the industry is in a downward cycle. The price drop on the cost side is beneficial to the improvement of profitability of downstream modified plastics and tire industries. On the other hand, modified plastics and tires, as rigid demand products, have relatively stable growth demands and maintain a high prosperity.

Modified plastics are intermediate products in the petrochemical industry chain. They are mainly made of five general-purpose plastics pe, pp, ps, abs and five engineering plastics pc, pa, pet or pbt, ppo, pom as plastic substrates, which are flame retardant. , Impact resistance, high toughness, easy processing and other characteristics. Modified plastics are typical industries that benefit from technological progress and consumption upgrades.

Modified materials are a cost-sensitive sub-industry

The largest downstream consumption of modified plastics is the home appliance industry and the automotive industry, which together account for more than 50% of the overall consumption of modified plastics. According to statistics, the average usage of modified plastics in color TVs, air conditioners, refrigerators and washing machines is between 1.5kg-2.5kg.

In fact, the profitability of modified materials is more sensitive to cost fluctuations. Taking Jinfa Technology (600143) as an example, modified plastic products are the company's main source of profit. Since the beginning of the year, the prices of its main raw materials such as polyolefin resins, polystyrene resins, and engineering resins have continued to fall, and the company's gross profit margin has continued to rise. .

Compared with foreign companies, the advantages of domestic manufacturers are low cost, fast market response, and excellent service; but the disadvantage is that the industry concentration is low, the size of a single enterprise is small, and the product quality, research and development capabilities, management level, etc. There is still a gap with advanced countries. Therefore, domestic manufacturers will more from the perspective of demand customization, with their flexibility to make up for the disadvantages of competition with multinational companies in the automotive special materials market, and penetrate to seize the rival market.

In addition, the profitability of modified materials is also affected by downstream demand. For example, Automobile Modified Plastics leader Plett (002324), the company's main products include modified PP, modified ABS, modified PC / ABS, modified PA and other modified composite materials, and its products are mainly used in the field of automotive materials. Although the prosperity of the automobile industry has declined, the fall in the prices of upstream chemical raw materials has released pressure on the company's product costs, and the gross profit margin has rebounded.

Oil service industry development budget increased this year

Unlike the downstream modified materials, the performance of the oil service industry, which is upstream of the petrochemical industry, is more certain this year. The capital expenditure of the industry depends on the change of "oil price-mining cost". The research opinion of Guojin Securities believes that if the cost of mining falls faster, even if the oil price falls, if the profitability of the oil service company is okay, the oil service company is still willing to increase capital expenditure. In recent years, technological advances have reduced the cost of oil and gas extraction. At present, high-level national leaders attach great importance to ensuring national energy security, and the impact of oil price fluctuations on China's oil and gas exploration and development and domestic oil service industry is expected to be weakened.

Although the Saudi oil price war has led to a significant drop in international oil prices, for China, oil and gas development investment is driven by the national energy security strategy and has little relationship with international oil price fluctuations. 2020 is the second year of the domestic oil and gas seven-year action plan. The domestic crude oil output still has a gap to the 200 million ton red line, and natural gas has a greater distance than the target. CNOOC announced that its 2020 exploration and development expenditure budget will be 663-4741 billion yuan, an increase of 18% -21% year-on-year. It is expected that the capital expenditures of CNPC and Sinopec will increase rapidly.

In addition, in the upstream of the petroleum industry, the three barrels of oil began to respond to national demands in the second half of 2018 to increase exploration and mining capital expenditures. Judging from the 2019 oil and gas production data, initial results have been achieved. According to the statistics of Guangdong Development Bank, the cumulative output of crude oil from January to November 2019 was 175 million tons, a year-on-year increase of 1%. This is the first time that crude oil output has turned into positive growth in the past four years. In the past 5 years, crude oil consumption has maintained steady growth, with a compound growth rate of 5.4%. There is still a large gap between the growth rate of crude oil production and the growth rate of consumption. It can be seen that after more than one year of continuous increase in investment in three barrels of oil, production increased It is still impossible to catch up with the consumption growth rate, and the external dependence of crude oil will still rise. Among the A-share listed companies, CNOOC (601808), CNOOC Engineering (600583), Petrochemical Oil Service (600871), etc. belong to the oil service field.