Chemical product prices fell, valuations fell

According to relevant reports, at the start of December 2012, the A-share chemical industry index dropped by 6.83%, underperforming the broader market. This downturn was largely driven by declining chemical product prices and reduced valuations. Looking across the different sub-sectors within the chemical industry, oil trading, inorganic salts, phosphate fertilizers, and pesticides emerged as some of the biggest losers. These sectors were primarily affected by fluctuations in oil prices or decreases in product values. We believe that overall demand in the chemical sector remains sluggish, with insufficient market demand across most segments. In the short term, we continue to view the industry as operating at its lowest point and maintain our "neutral" outlook for the sector. Industry Weekly Review: Summary: Over the past week, crude oil prices in the international market continued to experience volatility, while domestic chemical product prices saw further declines. External butadiene and natural gas (New York spot) prices fell by 6.0% and 8.7% respectively over the week. Domestically, **, butyl rubber, MAP: 60% powder, BDO, and titanium dioxide: anatase prices also declined by -4.2%, -3.8%, -3.6%, -3.3%, and -3.2% respectively. On the upside, the price of ** has seen significant volatility recently, surging from 150 yuan/ton last week to 250 yuan/ton. Additionally, external natural gas, MEG, and EDC recorded gains of 12.7%, 10.1%, and 3.7% respectively. Given the lag in crude oil price adjustments, combined with weak demand, product prices are likely to continue sliding. Crude Oil: Crude oil prices experienced a modest uptick this week. WTI and Brent crude oil prices increased by 0.7% and 0.1% respectively. The ongoing Eurozone crisis and uncertainty surrounding the U.S. fiscal cliff have kept crude oil prices volatile. Despite improving economic data from both China and the U.S., vigilance regarding the resolution of the fiscal cliff remains crucial. Caustic Soda: This week, caustic soda prices remained steady. Domestic chlor-alkali enterprises operated at low capacity due to restrictions imposed by **, maintaining stability in the caustic soda market. Trading activities remained subdued, with downstream demand remaining stable, providing support to the market. Merchants remained cautious about the market, expecting caustic soda prices to stay stable, though some regions might see a slight dip. MDI: Yantai Wanhua’s June pure MDI listing price stood at 19,100 yuan/ton for bulk water and 21,900 yuan/ton for barrels, a significant drop compared to October. Consequently, domestic pure MDI prices fell by approximately 8.8% this month. With recent maintenance and restarts in production facilities, market sentiment remains pessimistic regarding MDI prices. TDI: The December TDI listing price for Chuzhou Dahua, Shanghai BASF, and Gansu Yinguang was around 22,500 yuan/ton, marking a sharp decline of 16.7% this month.