Tianfeng: "Anti internal roll" lays the industry turning point, the petrochemical industry is expected to go from partial improvement to comprehensive recovery.

Tianfeng released a research report stating that controlling the increase in production is the main focus of long-term improvement in the industry, while reducing existing production focuses more on resolving current contradictions. As the production cycle comes to an end, industry improvement is expected to be more widespread. By 2026, the growth rate of production for most petrochemical products is expected to significantly decrease, and industries with high capacity utilization rates are expected to improve first. In 2026, there is hope for a coordinated opening of a replenishment cycle for the textile and clothing industry by both China and the United States, boosting PX demand. The supply and demand imbalance of PX is expected to widen, and may significantly contribute to the flexibility of the refining and chemical industry. Key points from Tianfeng include: - Controlling production increase & reducing existing production sets the industry turnaround by reversing "inward collapse". - Controlling production increase is the core strategy for long-term industry improvement: The "Stable Growth Plan for Petrochemical Industry" proposes to scientifically regulate major project constructions, strengthen planning and layout guidance for major petrochemical and modern coal chemical projects, control new refining capacity strictly, and determine ethylene and paraxylene production capacity and deployment pace reasonably. - Reducing existing production focuses on solving current contradictions, with safety, environmental protection, and energy efficiency as important policy leverage points. Industry collaboration is also playing a positive role, and in various segments of the petrochemical industry, industry associations or companies are actively promoting industry turnaround. Progress has been relatively positive in segments such as PTA, caprolactam, and polyester filament. - As the production cycle comes to an end, industry improvement is expected to be more widespread. - The petrochemical industry has not seen massive oversupply. High/mid capacity utilization rates and low prices/profits are the characteristics of this cycle. From the perspective of capacity utilization rates, the aromatics, polyester filament, methanol, acetic acid, short fibers, and MEG are at relatively high historical levels. Although PTA and ethylene loads have declined, they are still within a normal range, while there is considerable pressure from propylene oversupply. The reasons for this are digesting this round of capacity deployment through increased exports of chemicals and end products, import substitution, export expansion, and overall mild domestic demand recovery. - The industry is expected to transition from partial improvement to comprehensive recovery. - By 2026, the growth rate of new production capacity for most petrochemical products will decrease significantly. Based on this, industries with high capacity utilization rates are expected to see improvements first, such as PX, polyester filament, methanol, acetic acid, MEG, etc. Though olefin production capacity deployment may slow down, there is still some capacity growth, and there is still room for improvement in current capacity utilization rates, therefore olefin improvements may be relatively lagging. In 2027-2028, the growth rate of new production capacity in the industry will further decline. In the situation of high barriers to entry in the petrochemical industry, the industry's moat will further consolidate, transitioning from partial recovery to comprehensive improvement. - The PX industry chain in 2026 may bring profit elasticity to the refining and chemical industry. - In 2026, the new PX production capacity may be lower than expected. Recently, with the decrease in Russian refined oil exports due to sanctions and refinery attacks, combined with the continuous exit of refining capacity in Europe and the United States, overseas refined oil price differentials are rising again. This may open up opportunities for aromatic adjustment, and with China and the United States expected to resonate to open a replenishment cycle for textiles and clothing, boosting PX demand, the supply and demand imbalance of PX is expected to widen, contributing significantly to the flexibility of refining and chemicals. - Progress is positive in the anti-inward collapse of PTA & polyester filament, with low new production capacity growth expected in the industry in the future, and an increasing number of recent shutdowns for maintenance. The industry may continue to improve. Risks: Increasing supply risk; significant fluctuations in raw material prices; tariff risks; risks of demand falling short of expectations.