Hong Kong stock concept tracking | The downturn cycle of the petrochemical industry has reached a turning point, institutions are generally optimistic about the industry's trend going up (with concept stocks)

Since 2022, with the continuous release of new production capacity and the gradual decline of crude oil prices from high levels, prices of most chemical products have continued to fall, leading to a decrease in overall profitability as domestic companies implement a strategy of trading price for quantity to compete for market share. Since 2024, most chemical prices have bottomed out and companies' profitability remains under pressure. With the introduction of subsequent stable growth plans, CMSC believes that some outdated production capacity may be eliminated, leading to marginal improvements in the overall supply and demand pattern of the industry and a potential increase in product profitability. A research report by Huatai states that in the second half of 2025, under the pressure of weak demand and the end of incremental supply on the supply side, profits of bulk chemicals will reach a ten-year low. Compared to the trough of basic chemical products at the end of 2015, petrochemical products are also experiencing industry-wide losses or minimal profits. After three years of low profitability, the growth rate of fixed assets in the chemical raw materials and products industry turned negative in June 2025. According to Longzhong Information, there will be relatively few new production capacities for bulk chemicals in 2026-2027. Downstream textile, apparel, and rubber and plastic products also continue to have decreasing inventories, and chemical raw materials and products are at a turning point from actively depleting inventory to passively replenishing it. Huatai believes that bulk chemicals are currently at a dual turning point in terms of production capacity and inventory cycles, and with the recovery of domestic and international demand in 2026, they are expected to enter an upward phase. Additionally, as China National Chemical Engineering's global sales volume accounts for over half of the total, the intensity of corporate capital expenditure is expected to significantly decrease compared to the period of 2015-2025, and dividend payout ratio will rise. GF SEC points out that the chemical industry is a typical cyclical industry with a cycle of approximately five years, going through four stages of "profit growth-expansion of production capacity-profit bottoming-out-clearance of production capacity/improvement in demand expectations." With the turn of capital expenditure growth rate, anti-internal competition, overseas interest rate cuts, and expansion of domestic demand, we are optimistic about the "dawn" of the chemical industry at the beginning of the 15th Five-Year Plan period. Furthermore, continuous global technological revolutions are speeding up, bringing new opportunities for material transformation. Related HK stocks in the chemical industry chain: China Petroleum & Chemical Corporation(00386), Sinopec Oilfield Service Corporation(01033), SINOPEC SEG(02386), Sinopec Shanghai Petrochemical(00338), SINOPEC KANTONS(00934), CHINA SANJIANG(02198), WUHAN YOUJI(02881), etc.