Demand of the polycarbonate industry lags far behind capacity expansion

Due to the impact of public health emergencies, goggles have received high attention from the public as a shortage of medical supplies. The upstream raw material polycarbonate (PC) market for goggles has also been placed high hopes, but the reality is not as expected, the PC market. It continued to decline after the Spring Festival. As of early April, PC prices in East China had fallen below 13,000 CNY/ton, down 23.6% from the beginning of the year.

Industry analysis, the domestic goggles industry accounts for a very low proportion of PC downstream consumption, less than 1% in 2019, so the surge in demand for goggles did not bring strong support to the PC market. The recent decline in the PC market is mainly due to the steady increase in production capacity and the overall demand is difficult to boost.

In recent years, China's PC production capacity has maintained a growth trend. At the end of 2015, the total production capacity was only 590,000 tons, and by the end of 2019, it had reached more than 1.6 million tons, an increase of nearly three times. Although the apparent consumption of domestic PCs maintained a rapid growth trend, the growth rate of consumption was relatively slow. The apparent consumption in 2015 was 1.65 million tons, and it will be close to 2 million tons by 2019, with a cumulative increase of about 20% and an average annual growth rate of less than 5%, far behind the expansion of domestic production capacity. The substantial expansion of domestic PC production capacity and insufficient follow-up of downstream demand not only dragged down prices in the past two years, but also severely suppressed the industry's profitability. At the end of 2017, the PC price hit a historical high of 33,600 CNY/ton after continuing to rise. At that time, the price difference between it and the raw material bisphenol A was nearly 20,000 CNY/ton, and until now it has been less than 7,000 CNY/ton.

It is worth noting that the expansion of the PC industry has not faded until now. According to statistics, from 2020 to 2022, there are still nearly 2 million tons of PC devices in China about to be put into production or under construction. It is expected that by the end of 2022, China's actual total PC production capacity will exceed 3 million tons, and it will be blossoming everywhere. Production facilities will emerge in non-mainly consumer areas such as Southwest, Central China, South China, and Northeast China. However, due to factors such as limited core technology, the domestic new production equipment products are mainly low-end, and homogenization is very serious; and the new production enterprise products want to obtain the approval of downstream users and occupy the application market, are bound to rely on price and sales strategies . Therefore, with the continuous production of new devices, the domestic total production capacity and the supply of low-end materials will become more and more significant. Competition in the industry will intensify. Enterprise price cuts will become the norm, which will continue to drive down product prices and further squeeze profitability.

In the short term, the domestic PC industry still has a lot of downward pressure. On the cost side, the supply of raw material bisphenol A in the second quarter is relatively stable, but with the bottom of the crude oil running for a long time, the upstream phenolic ketone raw material support is weak, and there is still some room for decline in the future market; on the supply and demand side, although the second Downstream demand is difficult to pick up in the quarter, but domestic PC supply continues to grow. Market pressure continues to increase in the future, so it will further drag down the PC market price decline.