Pacific Securities: "Anti-insulation" catalyzes cycle recovery, "new economy" drives growth of new materials.

The Pacific Securities released a research report stating that looking to 2026, the International Energy Agency (IEA) predicts that the global crude oil market will face significant pressure from oversupply. However, they observed that the production pace of OPEC+ has slowed down, and with the US dollar in a rate-cutting cycle, providing some support for commodity prices. Furthermore, the current oil prices are close to the average prices of the past decade, leading them to believe that oil prices are likely to gradually stabilize, or even see a slight rebound. Key points from The Pacific Securities: Industry Review of 2025: Significant differentiation within the chemical industry As of December 12, 2025, the Shanghai Composite Index rose by 16.04% for the year, the CSI 300 Index by 16.42%, and the Shenzhen Component Index by 27.31%. The Zhongxin Basic Chemical Industry Index increased by 32.16%, while the Zhongxin Petroleum and Petrochemical Index only rose by 6.59%, indicating significant differentiation within the industry. Overall, the basic chemical industry performed better than the market, driven by factors such as the Siasun Robot & Automation industry chain and the increasing demand for electronic chemical materials due to AI. Industry Review of 2025: Significant differentiation within sub-industries As of December 12, 2025, in the Zhongxin first-level industries, 29 rose while only 2 declined. Petroleum and petrochemicals rose by 6.59%, while basic chemicals rose by 32.16%. Out of the 39 third-level sub-industries in the chemical industry, 38 rose while 1 declined. The top performers were potassium fertilizer (+85.87%), inorganic salts (+81.78%), and modified plastics (+75.99%), with refining (-8.99%), polyurethane (+0.46%), and viscose (+1.15%) at the bottom. In 2025, mineral resources like potassium fertilizer, lithium ore, and phosphate rock maintained good demand. In terms of domestic technological innovation, the development of new production capacity, the flourishing Siasun Robot & Automation industry chain, and the noticeable increase in demand for lightweight materials and modified plastics were highlighted. Looking ahead to 2026, the firm continues to be optimistic about scarce resource commodities and chemical materials related to new technologies. Review and 2026 Outlook for Energy Chemical Products: Oil prices and chemical prices expected to stabilize or see a slight rebound According to Wind data, as of December 12, 2025, the average prices for WTI and Brent crude oil futures were $65.05 per barrel and $68.36 per barrel respectively, significantly lower than the same period in 2024. Natural gas prices have seen a noticeable upward trend, while coal prices have stabilized. The China Chemical Product Price Index has decreased significantly since the beginning of the year and is now well below the 12-year average, indicating weak demand. However, there are recent signs of a rebound after hitting the bottom. Risk factors 1. Significant drop in product prices 2. Risk of unexpected increase in production capacity 3. Volatility in raw material markets 4. Risk of lower-than-expected downstream demand.