As of November 2025, China's industrial PPI, producer goods PPI, and chemical industry PPI have all recorded year-on-year negative growth for 38 consecutive months, forming the second-longest period of negative growth in history, second only to the 2012-2016 cycle which lasted for 54 months. Regarding product prices, based on price data since 2015, by the end of December 2025, out of the 111 chemical varieties tracked, 30 varieties had price percentiles below 10%, 70 varieties had price percentiles below 30% (including those below 10%), and only 25 varieties had price percentiles above 50%. In the most recent week (January 12th to 18th), prices for some products in the chemical market showed significant increases. Among the key tracked chemical products, the price of propylene oxide surged by 7.9% week-on-week, and the price of silicone intermediates also rose. Chemicals, as a typical cyclical industry, usually experience a 5-year cycle, progressing through four stages: "profit expansion - capacity expansion - profit bottoming - capacity rationalization/demand expectation improvement." With capital expenditure growth turning negative, anti-involution measures, overseas interest rate cuts, and domestic demand expansion, there is optimism for the chemical sector's "dawn" at the beginning of the 15th Five-Year Plan period. Furthermore, the global technology revolution continues to accelerate, bringing new opportunities for material transformation. Bulk chemicals are currently at an inflection point for both capacity and inventory cycles; with the recovery of domestic and international demand expected in 2026, the sector is poised to enter an upward phase. Concurrently, as China accounts for over half of global chemical sales volume, future corporate capital expenditure intensity is projected to decline significantly compared to the 2015-2025 period, while dividend payout ratios are expected to climb. Since late January, winter storms and extreme weather in the United States have caused disruptions to natural gas/power supply and rising energy prices in some affected areas. Operations at some refineries and chemical plants along the Texas Gulf Coast, a key US chemical supply region, have already been impacted. Given that the US still holds a relatively high share of global capacity for many bulk chemicals, potential supply reductions from this cold wave could impact the supply stability of related products. Meanwhile, as China's bulk chemical sector has reached a dual inflection point in its capacity and inventory cycles, potential supply reductions overseas may help boost operating rates and lead an early recovery in profitability for related domestic chemical products. Refining, ethylene, acetic acid, MDI, and TDI are among the areas of focus. Related Hong Kong-listed chemical sector stocks include: Sinopec (00386), Oilserv (01033), Sinopec Engineering (02386), SHANGHAI PECHEM (00338), Sinopec Kantons (00934), CHINA SANJIANG (02198), WUHAN YOUJI (02881), among others.
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