Debon Securities: The supply-side tightening trend continues to focus on the elasticity of H acid and reactive dyes

The Zhitong Finance App learned that Debon Securities released a research report, according to Baichuan Yingfu, as of June 9, the market price of H acid was 41,750 yuan/ton, +3.09% month-on-month and +22.79% year-on-year. The price hit a new high in nearly three years. The price increase of H acid, a key intermediate in this round, accelerated, and cost-side support may be further strengthened. As of June 9, the market price of reactive dyes was 23 yuan/kg, +4.55% month-on-month and +9.52% year-on-year. Judging from the industry pattern, China's reactive dye industry is highly concentrated. According to Baichuan Yingfu, CR4 reached 64.91% as of May 2025. Against this background, leading companies are willing or sufficient to raise prices, which is expected to further accelerate the rise in reactive dye prices.

The main views of Debon Securities are as follows:

Incident: According to Baichuan Yingfu, as of June 9, the market price of H acid was 41,750 yuan/ton, +3.09% month-on-month, +22.79% year-on-year, and the price hit a three-year high; during the same period, the reactive dye market price was 23 yuan/kg, +4.55% month-on-month, and +9.52% year-on-year.

H acid has high environmental pressure, and there is a gap between supply and demand for a long time

H acid is one of the key intermediate materials for the production of acidic, direct and reactive dyes, such as acid fuchsia 6B, acid red G, acid black 10B, direct black, active bright red K2BP, active purple K-3R, active dissolved blue K-R, etc. These dyes are used for dyeing wool and cotton fabrics, and can also be used to produce pharmaceuticals. However, the wastewater generated during the production of H acid is difficult to treat dye wastewater. It has deep color, complex composition, high toxicity, high salt content, and strong acidity. Direct biochemical treatment cannot be carried out, resulting in high treatment costs, so the environmental pressure on the industry has been high for a long time.

Taking history as a guide, many small and medium-sized H acid manufacturers have been eliminated one after another due to poor environmental requirements. Leading enterprises have also been affected. The operating rate has declined a lot, industry reshuffle has intensified, and backward production capacity has gradually been eliminated. According to the customs records of Leung Tu Co., Ltd., as of May 2025, the domestic effective production capacity of H acid is currently less than 60,000 tons, and there is a gap of more than 10% in the effective supply in the market.

Recently, due to the implementation of maintenance plans by some H acid manufacturers and the impact of the fire accident at the Yadong Fine Chemical Plant in Wuhai City, Inner Mongolia in April, the operating rate of the industry continued to be low. Furthermore, due to frequent production safety accidents in chemical companies, domestic inspection of production safety and environmental protection is expected to increase. The clean-up of the H acid industry may continue for a long time, industry concentration is expected to continue to increase, and the pattern will be continuously optimized.

The price of the raw material H acid has strengthened, supporting the rise in the price of reactive dyes

Reactive dyes are used to dye fabrics such as cotton and linen. More than 70% of the world's cotton textile printing and dyeing relies on such dyes, and H acid, an important raw material intermediate, accounts for about 30-50% of the production cost of reactive dyes. According to Baichuan Yingfu, as of June 9, the market price of H acid was 41,750 yuan/ton, +3.09% month-on-month and +22.79% year-on-year. The price hit a three-year high.

Debon Securities believes that due to factors such as the rigidity of downstream demand for active dyes and the high value of H acid, the price transmission mechanism from H acid to active dyes may be more effective. Since 2021, the price of reactive dyes has remained around 21 yuan/kg for a long time. Starting in 2024Q3, it has declined to 19 yuan/kg due to poor demand for downstream printing and dyeing. Since then, due to strong exports of main raw materials, support was formed on the cost side, opening up an upward channel for reactive dye price repair.

The price increase of H acid, a key intermediate in this round, has accelerated, and support on the cost side may be further strengthened. As of June 9, the market price of reactive dyes was 23 yuan/kg, +4.55% month-on-month and +9.52% year-on-year. Judging from the industry pattern, China's reactive dye industry is highly concentrated. According to Baichuan Yingfu, CR4 reached 64.91% as of May 2025. Against this background, leading companies are willing or sufficient to raise prices, which is expected to further accelerate the rise in reactive dye prices.

It is recommended to focus on the target

Jinji Co., Ltd. (300798.SZ), Jihua Group (603980.SH), Runtu Co., Ltd. (002440.SZ), Haixiang Pharmaceutical (002099.SZ), Zhejiang Longsheng (600352.SH).

Risk Alerts

Environmental inspections fall short of expectations, downstream demand falls short of expectations, raw material prices fluctuate greatly, and production safety risks.