RCEP will enhance the competitiveness of domestic chemicals

On November 15, the ten ASEAN countries and 15 countries including China, Japan, South Korea, Australia, and New Zealand formally signed the Regional Comprehensive Economic Partnership Agreement (RCEP), marking the official conclusion of the world’s largest free trade agreement. On November 16, the Ministry of Commerce interpreted: In terms of trade in goods, more than 90% of the goods trade in the region will eventually achieve zero tariffs after the agreement takes effect, and the tax will be reduced to zero immediately and within 10 years to make RCEP free trade The district is expected to fulfill all its commitments to liberalize trade in goods in a relatively short time.

We expect that RCEP will have limited impact on the direct export of chemical products, and downstream textiles and apparel and light industry may benefit most.

According to statistics from the Bureau of Statistics, from January to September 2020, the cumulative export volume of 39 major chemical products to 14 other RECP countries accounted for more than 10% of the total export volume. There are 4 product categories and 11 product categories with more than 5%. The proportion of chemical products directly exported to 14 other countries is not high, but we can find that China’s exports of textiles and electronic toys to these countries are relatively large. With the continuous reduction of trade barriers, it is beneficial to downstream exports of chemicals. This will drive the growth of demand for related chemicals. In addition, tariff reduction does not happen overnight. We believe that the short-term impact is limited; in the long-term, the establishment of a free trade zone will help the circulation and coordinated development of regional production materials and capital. At the same time, China’s chemical industry chain has the advantages of complete industrial chain supporting facilities and low-scale production costs. In the future, it will be beneficial to leading enterprises in the industrial chain of polyurethane, refining and chemical, chemical fiber, titanium dioxide, etc. "Leading" direction.

Favors the export of textile and apparel, and is optimistic about the continued prosperity of the chemical fiber industry chain.

In September, exports of textile yarns and clothing totaled 196.79 billion yuan, +17.2% year-on-year and -9.3% month-on-month; cumulative exports from January to September were 1,515.67 billion yuan, +12.3% year-on-year. Mainly due to the arrival of the traditional stocking season and the transfer of overseas orders to China, the concentrated demand was released. According to calculations by CCID Research Institute, RCEP can increase the growth rate of textile and apparel output by 0.86 percentage points during the "14th Five-Year Plan" period, and increase long-term export demand. At the same time, we expect short-term foreign order transfer will continue, superimposed on the strong domestic cold-proof clothing and home textile orders , The domestic textile and chemical fiber operating rate is expected to maintain an upward trend, driving the price of polyester, spandex, dyes and other products in the chemical fiber industry chain.

It is good for the export of titanium dioxide, which will boost the volume and price to rise again.

The demand for overseas titanium dioxide has rebounded sharply. According to customs data, my country's export volume of titanium dioxide in September was 112,000 tons, +33% year-on-year, and the cumulative exports from January to September were 890,000 tons, +19% year-on-year. Benefiting from the rapid recovery of domestic and foreign demand and the price increase of raw material titanium concentrate, the price of titanium dioxide continues to rise, and the price of rutile titanium dioxide (Belilian) has risen by 12.9% since the beginning of September to 15,800 CNY/ton. We expect that as foreign real estate construction and sales continue to recover, and RCEP promotes continued strong demand for titanium dioxide exports, prices will be further boosted.

We believe that in the long run, the RCEP agreement will help reduce trade costs among 15 countries, will enhance the mid- and long-term competitiveness of domestic chemical products, and drive the prosperity of the industrial chain upward.　

risk

The progress of the agreement fell short of expectations, and industry supply rose sharply.