Institutions: Optimistic about Chinese chemical assets ushering in a revaluation of value

Open Source Securities believes that, under the influence of the traditional “buy the rise, not the fall” mindset, because chemical commodity prices are highly anchored to crude oil prices, the procurement pace for midstream and downstream buyers for most chemical products has slowed significantly, mainly to consume earlier low-priced inventory. On the demand side, during the traditional peak demand season of the “Gold March and Silver April,” demand for chemical products remains relatively strong, resulting in most chemical product producers’ inventories or social inventories starting to show a downward trend since March 2026. In the short term, regional conflicts are intensifying; overseas orders may shift to domestic markets, which is expected to drive domestic chemical product demand or, at least, help stabilize and support chemical product price increases. Looking at the medium to long term, if global crude oil supply returns to normal in the future, affected overseas units that resume operations will also take time, and the global market may see a new round of chemical product replenishment demand. We are bullish on a value re-rating for China’s chemical industry assets.

CITIC Securities believes that, looking ahead to 2026, the expansion cycle in the chemical industry is nearing its end; measures such as “anti-involution” are expected to catalyze the bottoming and repair of industry profitability. Meanwhile, new materials, benefiting from the rapid development of downstream demand, are expected to usher in another new phase of high growth. In the short term, ongoing geopolitical conflicts continue to affect the supply and transportation of crude oil and some petrochemical products, increasing the magnitude of fluctuations. It is recommended to watch: 1) large energy central state-owned enterprises; 2) leading coal-to-chemicals companies and other entities with stable raw material supply and relatively low costs; and 3) precision chemical leading companies with favorable supply-demand dynamics and smooth cost transmission. For the medium to long term, it is recommended to focus on: 1) traditional chemical leaders, whose operating resilience is increasingly evident; by expanding into fields such as new materials, their competitive capabilities can improve against the trend, and with the industry’s business cycle turning for the better, they may see both earnings and valuation increases; 2) the continued catalysis from measures such as “anti-involution”—focus on sub-industries where supply-demand dynamics continue to improve, including refining and chemicals, polyester, dyes, organic silicon, agrochemicals, refrigerants, and phosphorus chemical industry; 3) the rapid development of downstream industries, with companies in the new materials sector offering broad room for growth.