Description of the event
China's exports of lubricant additives increased slightly month-on-month in November.
Incident reviews
In November, China's exports of lubricant additives increased month-on-month, in line with market expectations. According to customs data, China exported 16,600 tons of lubricant additives in November 2023, +2.4% over the previous month. The average export price was 21,569 yuan/ton, -4.2% over the previous year. From January to November 2023, exports totaled 193,900 tons, +6.55% year-on-year. The average export price was 22,870 yuan/ton, +3.72% year-on-year. In November, 171,000 tons of lubricant additives were imported, +19.32% month-on-month. The average import price was 29,992 yuan/ton, -1.69% month-on-month. From January to November 2023, a total of 183,800 tons were imported, -23.28% year-on-year, and the average import price was 3,058 yuan/ton, +13.06% over the same period last year. China's exports of lubricant additives have shown a sharp rise in volume and price.
There is still pressure on the volatile cost of crude oil, and the lubricant market is running smoothly. According to Wind, in November '23, the average settlement price of Brent futures was 81.9 US dollars/barrel, -7.71% over the previous year. Recent Red Sea ship incidents disrupted maritime route trade. Market concerns about the Red Sea crisis supported crude oil prices. On the 20th, Brent crude oil closed at 79.7 US dollars/barrel. Despite fluctuations in oil prices, cost pressure still exists, and the lubricant market is running smoothly. According to Baichuan, most lubricant manufacturers use sales to determine production, so production and sales can basically be balanced. Lubricant prices are expected to run steadily in December.
Major exporters of lubricant additives declined month-on-month. According to data from the General Administration of Customs, the top four countries exporting lubricant additives in China in November were Singapore, Russia, the United Arab Emirates and South Korea. The export volume was 3980.22, 3114.22, 3068.13, and 1481.56 tons, respectively, -4.35%, +20.27%, -18.25%, and -25.13% over the previous month.
Investment advice
Since the company is a leading domestic lubricant additive company, it has many outstanding capabilities such as API certification, scale, and cost leadership, etc., and the global market demand is about 4.2 million tons. The company's penetration rate is still less than 5%. Compared with the top four overseas companies, it still has a strong cost performance advantage. The company's net profit for 23-25 is estimated to be 628/7.61/877 billion yuan respectively, corresponding to the company's market value of 14.8 billion yuan on December 21, and PE of 23.6\ 19.4\ 16.9 times in 2023-2025, respectively, maintaining the “buy-B” rating.
Risk warning
Risk of price increases of raw materials: Since the main raw materials of lubricant additives are base oil, isooctyl alcohol, phosphorus pentasulfide, isobutene sulfide, α-olefin, etc., these materials are mainly downstream petrochemical products and are positively correlated with crude oil prices. If crude oil prices rise rapidly in the short term, it is easy to cause a sharp increase in the price of related raw materials, which has an impact on product profitability.
Overseas market policy risk: Since there are certain differences in import and export tariffs on lubricant additives in different regions, an increase in overseas tariffs on lubricant additive products exported from China will cause a certain decline in external demand in this industry.
Competition increases risk: Currently, overseas AddiTech has increased its lubricant additive production capacity from 20,000 tons to 40,000 tons by the end of 2022, which will have a certain impact on related import demand in the region.