Tianfeng Securities released a research report stating that the petrochemical industry is approaching a critical inflection point driven by policies to "control new capacity and reduce existing capacity." From a capacity cycle perspective, the industry is entering the final stage of capacity expansion, with growth rates for most products expected to slow significantly by 2026.
Looking ahead to 2026, the PX industry chain is poised to deliver substantial profit elasticity for refining and chemical enterprises amid intensifying supply-demand imbalances. Meanwhile, PTA and polyester filament sectors are expected to see continuous improvement due to anti-overcapacity measures and decelerating capacity growth. The report forecasts a transition from sporadic recovery to comprehensive industry-wide enhancement between 2027 and 2028, recommending a focus on leading companies with competitive advantages in niche segments.
Key insights from Tianfeng Securities include:
**Policy-Driven Inflection Point: Anti-Overcapacity Measures Take Effect** Controlling new capacity is central to medium- and long-term industry improvement. The "Work Plan for Stable Growth in the Petrochemical Industry" emphasizes scientific regulation of major projects, stricter oversight of new refining capacity, and rational planning for ethylene and paraxylene (PX) expansions. Reducing existing capacity focuses on resolving current challenges, with safety, environmental compliance, and energy efficiency serving as key policy levers. Industry collaboration has also played a positive role, with trade associations and companies actively promoting anti-overcapacity initiatives in segments like PTA, caprolactam, and polyester filament.
**Capacity Cycle Nears End: Recovery to Expand from Segments to Whole Industry** The petrochemical sector currently avoids severe overcapacity, characterized by moderate-to-high operating rates and low prices/profits. From 2019 to 2025E, average annual capacity growth for many petrochemical products exceeded 10%, yet utilization rates for aromatics, polyester filament, methanol, acetic acid, staple fiber, and MEG remain historically high. Although PTA and ethylene utilization rates have declined slightly, they stay within normal ranges, while propylene faces relatively higher oversupply pressure. This dynamic reflects efforts to absorb new capacity through export-driven volume growth, import substitution, and steady domestic demand recovery.
By 2026, capacity growth for most petrochemical products will decelerate markedly. Sectors with high utilization rates—such as PX, polyester filament, methanol, acetic acid, and MEG—are likely to lead the recovery. Olefins may lag due to persistent capacity additions and room for utilization improvements. By 2027–2028, new capacity growth will further decline, and high industry entry barriers will strengthen competitive moats, enabling a shift from fragmented to broad-based recovery.
**PX Industry Chain to Drive Refining Profit Elasticity in 2026** PX capacity additions in 2026 may fall short of expectations. Recent sanctions and refinery attacks have reduced Russian fuel exports, while refinery closures in Europe and the U.S. have widened overseas fuel spreads, potentially reopening the aromatics-to-fuel arbitrage window. Concurrently, China and the U.S. may synchronize textile restocking cycles in 2026, boosting PX demand and exacerbating supply-demand imbalances, thereby enhancing refining profitability.
PTA and polyester filament sectors show positive anti-overcapacity progress, with slower future capacity growth and increasing maintenance shutdowns supporting gradual improvement.
**Recommended Stocks**: Hengli Petrochemical, Rongsheng Petrochemical, Hengyi Petrochemical, Oriental Energy, Sinopec. **Watchlist**: Huajin Chemical.
**Risks**: Supply increases; raw material price volatility; tariff risks; weaker-than-expected demand.
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