The Zhitong Finance App learned that Open Source Securities released a research report saying that PA66 can simultaneously develop in the fields of engineering plastics, civil wire, etc., and demand still has a lot of room for development. In January-February, with the gradual recovery of the domestic economy, the domestic NEV, home appliance and other industries continued to increase, driving the apparent consumption of PA66 increased 48% year on year, reaching 118,300 tons. At the same time, there are high technical barriers to the production of PA66 raw material adiponitrile. In the future, as demand for PA66 continues to increase, adiponitrile may maintain a tight pattern if the localization process of adiponitrile production capacity is slow, adiponitrile may maintain a tight pattern, driving PA66 prices up. Beneficiaries: China Chemical (601117.SH), Shenma Co., Ltd. (600810.SH).

Open source securities views are as follows:

PA66 can work simultaneously in the fields of engineering plastics, civil wire, etc., and demand still has a lot of room for development

PA66 has high mechanical strength and is mainly used in the field of engineering plastics. According to data from Zhuochuang Information, in 2023, the proportion of PA66 used in engineering plastics in China was 57%, industrial wire accounted for 29%, and civilian wire accounted for 10%. According to Baichuan Yingfu data, from January to February 2024, with the gradual recovery of the domestic economy, the boom in the domestic NEV, home appliance and other industries continued to increase, driving the apparent consumption of PA66 increased 48% year-on-year to 118,300 tons.

According to Aibang Polymer's official account, the global consumption ratio of PA6 to PA66 is about 70:30. According to Baichuan Yingfu data, the apparent consumption ratio of PA6 to PA66 in China in 2023 is about 90:10. Assuming that the apparent consumption of PA66 accounts for 30% of the total apparent consumption of PA6 and PA66 in 2023, the apparent consumption of PA66 should be 1.461,800 tons. Compared with the actual apparent consumption of PA66 in 2023, there is room for 179% growth.

The PA66 raw material adiponitrile production technology barriers are high, and future production capacity of adiponitrile may be low

According to “Advances and Prospects of Adinitrile Production Technology” (Zhao Guozhong), “adipitrile produced by direct cyanidation of butadiene → adipic acid → PA66 salt” has the advantages of low raw material cost, high product quality and yield, and short process route. It is the current mainstream process, accounting for about 60% of production capacity, but the production technical barriers of adiponitrile are high, and China's import dependency is high. In 2022, China's adipitrile import dependency is 73.89%. Due to insufficient supply of adiponitrile as a raw material, the domestic PA66 production capacity expansion process is slow. According to Baichuan Yingfu data, by the end of 2023, PA66 production capacity was 855,000 tons/year, up 22.14% year on year, with an average compound annual growth rate of 24.12% from 2021 to 2023.

If the breakthrough in localization of adiponitrile production technology progresses slowly, the supply of adiponitrile may continue to show a tight pattern, and the domestic PA66 production capacity growth rate may remain low. According to data from Baichuan Yingfu, Longzhong Information and the bank's forecast, domestic PA66 production capacity is expected to be put into operation in 2024, or 320,000 tons/year, with a capacity growth rate of 37.43%.

If the localization process of adiponitrile is slow, supply and demand for adiponitrile may be tight, driving PA66 prices to rise

According to Wind data and the bank's estimates, as of April 12, the PA66 price was 23,500 yuan/ton, +14.08%; the price differences of PA66 for the butadiene method, adipic acid method, and acrylonitrile method were 1.14, 0.56, and 0.56 million yuan/ton, respectively, +11.53%, +109.12%, and +50.11%, respectively. Among them, the price difference between butadiene PA66 and raw materials was higher than that of other processes. In the future, as demand for PA66 continues to increase, and if the localization process of adiponitrile production capacity is slow, adiponitrile may maintain a tight pattern, driving PA66 prices up.

Beneficial targets:

China Chemical: The company is an integrated engineering construction enterprise, and Sun Company Tianchen Qixiang has adiponitrile production capacity. According to Aiqicha and China's Tianchen official account, as of April 2024, Tianchen Engineering, a wholly-owned subsidiary of China Chemical, held 75% of Tianchen Qixiang's shares, while Tianchen Qixiang had 200,000 tons/year of butadiene hexadiene diazedinitrile production capacity.

Shenma Co., Ltd.: The company is an integrated PA66 leading enterprise and guarantees the supply of core production materials through multiple channels. According to the announcement of Shenma Co., Ltd., by the end of 2023, Shenma Co., Ltd. had a PA66 slice production capacity of 190,000 tons/year. Shenma Co., Ltd. guarantees the supply of raw materials for production through multiple channels, including signing a long-term purchase and sale agreement for adiponitrile with INVISTA and the ongoing construction of 50,000 tons/year butadiene adiponitrile production capacity. Meanwhile, according to the New Chemical Materials website, Shenma Group, the controlling shareholder of the company, already has an aminohexanitrile production capacity of 20,000 tons/year. If the supply of adiponitrile is tight in the future, Shenma Group can supply aminohexanitrile to Shenma Co., Ltd. to produce PA66. Beneficiaries: China Chemical and Shenma Co., Ltd.

Risk warning: Weakening downstream demand, industry capacity expansion falling short of expectations, etc.