Recently, the General Administration of Customs released import and export data for the first three quarters of 2024. In terms of US dollars, China's imports in September increased by 0.3% year-on-year, below the expected 0.9% and previous value of 0.5%; exports decreased by 2.4% year-on-year, lower than the expected 6% and previous value of 8.7%. China's trade balance in September was $81.71 billion, below the expected $89 billion and previous value of $91.02 billion. Although this still indicates positive growth, it has declined from previous values and did not meet expectations. Notably, this marks the month with the lowest export growth rate known for this year, with September exports falling to the lowest level since February 2024.

Overseas Exports Encounter "Freeze," Orders Plummet

In light of the recent significant decline in economic data, industry experts have delved into the underlying causes. A critical factor is the weakening pulse of the global economy. The global manufacturing PMI has been declining for four consecutive months, reaching its lowest value since October 2023, which has led to a drop in new export orders from China. This phenomenon reflects not only a contraction in international market demand but also directly impacts the volume of China's new export orders, subjecting them to a cold wave. This "freezing" situation is caused by various complex factors. 

This year, frequent and intense typhoons have disrupted the usual climate patterns and severely interfered with maritime transportation, resulting in container port congestion in China reaching its highest level since 2019 in September, increasing the difficulty and uncertainty of exporting goods. Coupled with escalating trade frictions, the uncertainties from the US elections, and negotiations for labor contract renewals with dockworkers on the US East Coast, the external trade environment is filled with more unknowns and challenges. 

These instability factors not only raise transaction costs but also weaken market confidence, becoming significant external forces that suppress China's export performance. The recent export situation is also bleak across various industries, including the traditional chemical industry, a pillar of the industrial sector. According to the import and export commodity composition table for August 2024 released by the General Administration of Customs (in RMB value), the exports of inorganic chemicals and other chemical raw materials and products fell by 24.9% and 5.9%, respectively, compared to the same period last year.

Domestic Consumption Downgrade, Deflation Risks Intensify

Due to international circumstances, many enterprises report no signs of order recovery recently, with severe challenges remaining. Chemical enterprises in several major economic provinces are facing a slump in orders, leaving many companies without work and forced to lay off employees, reduce salaries, or even temporarily halt operations to cope with operational pressures. Numerous factors contribute to this situation; in addition to overseas uncontrollable circumstances and sluggish downstream markets, issues such as overcapacity, market saturation, and severe product homogeneity exist within the chemical market, leading to vicious competition among industries. To survive, paint and chemical companies can only seek ways to break through in an oversaturated market. Compared to the time-consuming and costly path of innovation and research and development, many enterprises still choose price wars and internal competition as a "quick fix." 

In mid-October 2024, among key pricing institutions in the chemical industry, multiple varieties from five institutions experienced significant price declines compared to four weeks prior, with an average decline of 18.1%. Leading companies like Sinopec, Lihuayi, and Wanhua Chemical have initiated price cuts, with prices for products like sulfuric acid, soda ash, mixed xylene, sodium bicarbonate, toluene, and MTBE dropping over 10%. Lithium carbonate plummeted by 5,000 yuan per ton, while TDI and caprolactam decreased by about 1,000 yuan per ton. The hidden reality behind this is the overall market deflation. 

As former People's Bank of China Governor Yi Gang stated, China is facing weak domestic demand, especially in consumption and investment. "China should now focus on resisting deflationary pressures." The GDP deflator index has been negative for five consecutive quarters. The last time the GDP deflator index was negative was during the 2008 financial crisis, where it was only briefly negative for three quarters before quickly rebounding.

In September 2024, the PPI fell by 2.8% year-on-year, a clear sign of deflationary pressure. In the CPI sector, the national consumer price index remained flat month-on-month in September. In detailed data, the price of fresh vegetables soared by 22.9%, contributing approximately 0.48 percentage points to the CPI increase. Vegetable prices rose by nearly 30%. If vegetables are excluded, there would be negative year-on-year growth.

Export "Stalled," Market Footsteps May Follow

During deflation, the transmission is concealed; behind falling prices are declining corporate revenues, decreasing personal incomes, and reduced consumption, leading to a series of problems. In this unprecedented market winter, the fate of the chemical industry seems to be at the forefront of crisis. The cliff-like drop in order volume and the continuous contraction of the market act like two blades, ruthlessly severing the survival space for enterprises. Behind the plummeting performance are tight cash flows and strained debt chains, with growing concerns that such predicaments are not isolated but are spreading throughout the industry, forming a suffocating norm. 

The sharp decline in order volume and market deflation in the chemical industry has severely impacted corporate operations, even triggering bankruptcies and reorganizations. In the first three quarters of this year, there were 245 recorded bankruptcy reorganization cases for paint companies, and a total of 3,187 bankruptcy reorganizations in the chemical industry. The once prosperous investment ground and marketing landscape now seem so fragile in the face of this storm, disappearing without a trace in an instant, leaving one to lament.

In this series of chain reactions, numerous chemical companies have collapsed like a row of dominoes, profoundly affecting the entire upstream and downstream of the industrial chain. Suppliers face difficulties in recovering payments, while downstream customers panic over product shortages, raising the risk of market stampedes that could drag the complex web of the chemical industrial chain into the abyss.