1、 Overview of overall operational status

In 2024, the overall operation of China’s chemical industry is not good under the influence of the overall environment. The profitability level of production enterprises has generally decreased, the orders of trade enterprises have decreased, and the pressure on market operation has significantly increased. Many companies are striving to explore overseas markets in order to seek new development opportunities, but the current global market environment is also weak and has not provided sufficient growth momentum. Overall, China’s chemical industry is facing significant challenges.

2、 Analysis of Profit Status of Bulk Chemicals

In order to gain a deeper understanding of the operation of the Chinese chemical market, a survey was conducted on 50 types of bulk chemicals, and the industry average profit margin level and its year-on-year change rate from January to September 2024 were analyzed.

Distribution of Profit and Loss making Products: Among the 50 types of bulk chemicals, there are 31 products in a profitable state, accounting for approximately 62%; There are 19 products in a loss making state, accounting for approximately 38%. This indicates that although most products are still profitable, the proportion of loss making products cannot be ignored.

Year on year change in profit margin: From the perspective of year-on-year change rate, the profit margin of 32 products has declined, accounting for 64%; The profit margin of only 18 products increased year-on-year, accounting for 36%. This reflects that the overall situation this year is significantly weaker than last year, and although the profit margins of most products are still positive, they have decreased compared to last year, indicating poor overall performance.

3、 Distribution of profit margin levels

Profit margin of profitable products: The profit margin level of most profitable products is concentrated in the 10% range, with a small number of products having a profit margin level above 10%. This indicates that although the overall performance of China’s chemical industry is profitable, the level of profitability is not high. Considering factors such as financial expenses, management expenses, depreciation, etc., the profit margin level of some enterprises may further decline.

Profit margin of loss making products: For loss making chemicals, most of them are concentrated within the loss range of 10% or less. If the enterprise belongs to an integrated project and has its own raw material matching, then products with slight losses may still achieve profitability.

4、 Comparison of Profitability Status of Industrial Chain

Figure 4 Comparison of profit margins of China’s top 50 chemical products in 2024

Based on the average profit margin level of the industry chain to which 50 products belong, we can draw the following conclusions:

High profit products: PVB film, octanol, trimellitic anhydride, optical grade COC and other products exhibit strong profitability characteristics, with an average profit margin level of over 30%. These products usually have special properties or are located at a relatively lower position in the industry chain, with weaker competition and relatively stable profit margins.

Loss making products: Petroleum to ethylene glycol, hydrogenated phthalic anhydride, ethylene and other products have shown significant losses, with an average loss level of over 35%. Ethylene, as a key product in the chemical industry, its losses indirectly reflect the overall poor performance of China’s chemical industry.

Performance of the industrial chain: The overall performance of the C2 and C4 industrial chains is good, with the largest proportion of profitable products. This is mainly due to the decline in downstream product costs caused by the sluggish raw material end of the industrial chain, and profits are transmitted downwards through the industrial chain. However, the performance of the upstream raw material end is poor.

5、 Extreme case of year-on-year change in profit margin

N-Butane based maleic anhydride: Its profit margin has the largest year-on-year change, shifting from a low profit state in 2023 to a loss of about 3% from January to September 2024. This is mainly due to the year-on-year decrease in the price of maleic anhydride, while the price of raw material n-butane has increased, resulting in increased costs and decreased output value.

Benzoic anhydride: Its profit margin has increased significantly by nearly 900% year-on-year, making it the most extreme product in terms of profit changes for bulk chemicals in 2024. This is mainly due to the crazy rise in the global market caused by the withdrawal of INEOS from the global market for phthalic anhydride.

6、 Future prospects

In 2024, China’s chemical industry experienced a year-on-year decline in overall revenue and a significant decrease in profitability after experiencing a reduction in cost pressure and a decline in product price centers. Against the backdrop of stable crude oil prices, the refining industry has seen some recovery in profits, but the growth rate of demand has significantly slowed down. In the bulk chemical industry, the homogenization contradiction is more prominent, and the supply and demand environment continues to deteriorate.

It is expected that the Chinese chemical industry will still face certain pressure in the second half of 2024 and within 2025, and the adjustment of industrial structure will continue to deepen. The breakthroughs in key technologies and new products are expected to drive product upgrades and promote the sustained high profit development of high-end products. In the future, China’s chemical industry needs to make more efforts in technological innovation, structural adjustment, and market development to cope with current and future challenges.