In the first quarter of this year, the net profit attributable to the parent company of Huayi Group, Hualu Hengsheng and Jiangsu Sopu increased by 1345.3%, 36.3% and 123.3% year-on-year.
And the main business of these three companies all points to one industry, that is, acetic acid.
Acetic acid should be unfamiliar to everyone, but polyester fibers and EVA produced from it as a raw material have been widely used in the textile, plastic and photovoltaic industries.
At present, the performance of acetic acid enterprises has increased to varying degrees, which shows that the prosperity of the acetic acid industry is also rising.
So, what are the factors that promote the recovery of the acetic acid industry?
Due to the reduction of inventory pressure and the stability of the operating rate of acetic acid enterprises, in April this year, the domestic acetic acid market gradually improved, and the price of acetic acid increased by 150 yuan year-on-year, with an overall increase of 4.84%.
On the supply side, the industry production capacity in 2023 will be 11.26 million tons, an increase of 20.43% compared with the industry production capacity in 2020, and the capacity utilization rate of the acetic acid industry is still 84% in the context of weak demand and substantial growth in production capacity.
Since 2024, many domestic and foreign enterprises have stopped their equipment for maintenance, resulting in the overall operating rate of acetic acid decreasing again and the supply side tightening.
In terms of new production capacity, the industry's planned production capacity exceeds 8 million tons. However, only two sets of units are expected to be put into operation in 2024, namely the 800,000-ton unit of Hebei Kingboard and the 1 million ton unit of Xinjiang Zhonghe Hezhong, and the remaining production capacity is expected to be put into operation in 2025 and beyond.
With the decline in domestic and foreign operating loads and the limited new domestic production capacity, the supply side of acetic acid will be tightened in 2024.
Since 2023, with the increase in domestic coal production and supply and the liberalization of imported coal, the market price fluctuations have declined, which is conducive to increasing the profitability of acetic acid enterprises.
On the demand side, the downstream of acetic acid is mainly concentrated in terephthalic acid (PTA), acetate, and vinyl acetate (EVA), among which the new production capacity of PTA and EVA has increased in recent years, making the demand for acetic acid increase from 6.9529 million tons in 2019 to 8.6749 million tons in 2023.
From 2019 to 2023, PTA production capacity increased from 48.55 million tons to 78.72 million tons, which is calculated that a single ton of PTA needs 0.04 tons of acetic acid as a solvent, which will drive the demand for acetic acid by about 1.2 million tons.
EVA is the downstream of vinyl acetate, and as the most widely used photovoltaic film material, its market share is about 52%. From 2019 to 2023, with the growth of photovoltaic demand, EVA production capacity increased from 972,000 tons to 2.45 million tons, which in turn drove the demand for acetic acid.
By 2025, the global new PV capacity is expected to reach 300GW, corresponding to about 800,000 tons of acetic acid demand.
In addition, from the export data, from January to February 2024, the total export volume of acetic acid reached 190,300 tons, a year-on-year increase of 23.04%. In the case of supply and demand resonance, acetic acid prices are expected to continue to rise.
Standing at the starting point of a new round of upward cycle, what are the new changes in the acetic acid market?
Continental is the world's largest producer of acetic acid, with a production capacity of about 11.7 million mt/year at the end of 2023, accounting for more than half of the world's production capacity.
Most of the production capacity of the domestic acetic acid industry is concentrated in the head manufacturers, and the market share of the top five companies is as high as 56%. Among them, Huayi Group ranks first in the industry with a production capacity of 1.7 million tons/year, with a market share of 14.04%.
In addition, Hualu Hengsheng and Jiangsu Sopu City have an equal share, each with 11%.
With the commissioning of the new 100 tons/year acetic acid product line in the first phase of the Jingzhou base, Hualu Hengsheng's acetic acid production capacity will increase to 1.4 million tons/year in 2023, becoming the second in the industry, and Jiangsu Sopu will rank third with a production capacity of 1.2 million tons/year.
In addition to traditional acetic acid enterprises such as Huayi Group and Hualu Hengsheng, refining and chemical enterprises such as Lunan Chemical and Zhong'an United Coal Chemical have also carried out acetic acid business layout, forming their own self-supply of raw materials and supporting the downstream EVA industry chain, so as to reduce the purchase of solvents required for refining PTA.
The construction of acetic acid integration projects of several refining and chemical enterprises will be completed in 2025, and it is expected that by 2026, the acetic acid market will face a new round of capacity digestion pressure.
In the case of sufficient capacity supply, cost has become a must for major acetic acid enterprises.
For example, the first phase of Hualu Hengsheng Jingzhou project has made the annual comprehensive energy consumption less than 5% of the approved value through more than 10 energy-saving measures such as pressurized gasification process, saving 32,000 tons of coal compared with the expected and greatly reducing production costs.
In addition, Hualu Hengsheng also uses Jiangling Petrochemical Terminal to reduce transportation costs by means of waterway transportation, according to the annual output of 700,000 tons of acetic acid in the first phase of Hualu Hengsheng, it can save 300 yuan per ton of transportation costs, and 210 million yuan a year.
In addition to Hualu Hengsheng, Jiangsu Sopu has also reduced production costs by improving production efficiency, and through the use of micro-interface carbonyl synthetic acetic acid technology, the comprehensive manufacturing cost of acetic acid products of Jiangsu Sopu has decreased by 60 yuan/ton, saving production costs of 12 million yuan/year.
Among the acetic acid companies, which company has the greatest development potential?
In the first quarter of 2024, Jiangsu Sopu's revenue was 1.501 billion yuan, a year-on-year increase of 13.3%, and the net profit attributable to the parent company was 2,600, a year-on-year increase of 123.3%, and the good performance also attracted 82 institutions to hold shares.
Due to the recent TMA (potassium trimelliate) and Zhengdan shares out of the circle, Jiangsu Thorpe's performance is expected to be further improved.
As of April, the domestic TMA price was 26,500 yuan/ton, an increase of about 89.3% compared with the beginning of 24 years.
Acetic acid is the preparation solvent of TMA (trimellitic anhydride), and Jiangsu Sopu is the acetic acid supplier of Zhengdan Co., Ltd., a leading TMA company.
The related-party transactions between Jiangsu Sopu and Zhengdan Co., Ltd. increased from 2.37 million in 2023 to 40 million in 2024, an increase of 17 times, which in turn boosted the performance.
In addition, Jiangsu Thorpe also maintains the stability of revenue through the sales model, such as the proportion of the company's direct sales customers accounts for 80%, thereby enhancing customer stickiness and reducing the sales expense rate, which is only 0.2% in 2023, the lowest in the industry.
At the same time, Jiangsu Sopu further broadened its export channels and optimized its revenue structure, with export revenue reaching 1.112 billion yuan in 2023, accounting for 20.63%.
In terms of industrial chain synergy, in 2023, Jiangsu Sopu will invest 7.1 billion yuan in the construction of vinyl acetate and EVA projects in the downstream of acetic acid, with a planned production capacity of 330,000 tons and 300,000 tons respectively, which promotes the diversification of the company's business and enhances the stability of income through integrated layout.
In terms of solvency, Jiangsu Thorpe's monetary funds/interest-bearing liabilities have always been greater than 1 in the past three years, and the interest-bearing debt ratio is 26.87%, which is far lower than the interest-bearing debt ratio of more than 50% of Huayi Group and Hualu Hengsheng, indicating that the company's solvency is good.
To sum up, with the fluctuation of raw coal prices and the gradual release of downstream photovoltaic installed demand, the acetic acid industry has now rebounded, among which Huayi Group, Hualu Hengsheng and Jiangsu Sopu have obvious production capacity advantages.
As a supplier of Zhengdan Co., Ltd., Jiangsu Sopu uses advanced technology to reduce production costs while actively carrying out downstream integration layout, so as to continuously enhance its competitiveness and its performance is expected to improve significantly.
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