China's Export Growth Hits a Year-to-Date Low in the First Three Quarters of 2024, Trade Surplus Falls Short of Expectations, Chemical Industry Faces Severe Challenges!

The General Administration of Customs has officially released import and export data for the first three quarters of 2024. Data showed that in dollar terms, China's imports in September increased by 0.3% year-on-year, lower than the market expectation of 0.9%, and also decreased from the previous value of 0.50%; Exports grew 2.4% year-on-year, also missing market expectations of 6% and significantly lower than the previous 8.70%. In addition, China's September trade surplus of $81.71 billion, also missed the market forecast of $89.8 billion and the previous estimate of $91.02 billion. Although it still maintains a positive growth trend, the growth rate has slowed down significantly and has not met market expectations. In particular, export growth this month was the lowest since the beginning of the year, and year-on-year fell back to the lowest level since February 2024.

In response to the significant decline in the above economic data, industry experts conducted an in-depth analysis, pointing out that the global economic slowdown is an important factor that cannot be ignored. The global manufacturing purchasing managers' index (PMI) has declined for four consecutive months to the lowest level since October 2023, which directly led to the decline in China's new export orders. This phenomenon not only reflects the shrinking international market demand, but also has a significant impact on China's new export orders, making it face severe challenges.

In-depth analysis of the cause of this "frozen" situation, we can find that there are many complex factors behind it. This year, the frequent and extraordinary intensity of typhoon activities seriously disrupted the order of maritime transport, leading to the congestion of container ports in China in September to reach the peak since 2019, further aggravating the difficulty and uncertainty of cargo going to sea. At the same time, the continued escalation of trade frictions, the policy uncertainty brought about by the US election, and the impasse in the negotiation of the labor contract renewal of dockworkers on the East coast of the United States, together constitute many unknowns and challenges in the external environment of trade.

These unstable factors have not only pushed up transaction costs, but also seriously weakened market confidence and become an important external force inhibiting China's export performance. In this context, the recent export situation of many industries is not optimistic, and the traditional chemical industry, as the pillar of the industrial field, has not been spared. According to the composition table of import and export commodities in August 2024 released by the General Administration of Customs, the cumulative export of inorganic chemicals, other chemical raw materials and products declined significantly year-on-year, reaching 24.9% and 5.9% respectively.

Looking further at China's chemical export data in the first half of this year, among the top five overseas markets, exports to India fell 9.4% year-on-year. In the top 20 overseas market exports, domestic chemical exports to developed countries generally showed a downward trend. This trend indicates that the changes in the international situation have a great impact on the export of chemicals in our country.

In the face of the severe market situation, many companies have reported that recent orders have not yet shown signs of recovery. Many chemical enterprises in large economic provinces have suffered from the dilemma of cold orders, and a large number of enterprises are facing the dilemma of no order. In order to cope with the operating pressure, enterprises have to take measures to lay off employees and cut wages, and even temporarily close down.

There are many factors causing this situation, in addition to overseas force majeure and downstream market downturn, the chemical market in the presence of overcapacity, market saturation, product homogenization and other serious problems are also important reasons. These problems have led to vicious competition within the industry, making it difficult for enterprises to extricate themselves from the dilemma.

In order to seek a way to break the situation, coating chemical enterprises have sought a way out in the surplus market. However, compared with the time-consuming, huge investment in innovation and research and development road, many companies still choose the price war and internal volume of the "quick fix". Although this short-sighted behavior can ease the pressure on enterprises in the short term, in the long run, it may exacerbate the risk of vicious competition and deflation in the market.

Indeed, such risks are already emerging in the market. In mid-October 2024, the price of many varieties in the key quotation institutions of the chemical industry fell sharply, with an average decline of 18.1%. Leading companies such as Sinopec, Lianyi and Wanhua Chemical have taken the lead in cutting prices, with prices of some products falling by more than 10%. Behind this phenomenon is the risk of deflation in the entire market, which needs to be highly concerned both inside and outside the industry.