Guosheng: Global chemical industry capital expenditure peaks; geopolitical conflicts accelerate cyclical recovery.

Guosheng released a research report stating that the growth rate of fixed asset investment in the chemical industry continues to decline. The previous round of capacity expansion is shifting from concentrated construction to production and absorption, and the pressure from future new supply is gradually weakening. With the exit of high-cost capacity, industry inventory digestion, and geopolitical conflicts compressing effective supply, Guosheng is bullish on the cyclical recovery of the chemical industry and recommends focusing on the following investment themes: 1. The global chemical supply landscape is being reshaped, and China's chemical industry continues to increase its global share; 2. Geopolitical conflicts continue to disrupt the supply of crude oil, natural gas, and refined products, with oil price centers and refining-chemical spreads fluctuating upward; 3. High-prosperity sub-sectors with strong supply constraints and earlier improvements in inventory and profitability; 4. Policies such as "dual carbon" and "anti-involution" are driving constraints on new investment and optimization of existing capacity, and the supply-demand landscape of industries such as polyester, dyes, and pesticides is expected to gradually improve; 5. Downstream demand growth in AI, semiconductors, new energy, and energy storage is driving the expansion and domestic substitution of sub-sectors such as fluoropolymers, electronic chemicals, high-end resins, semiconductor materials, copper-clad laminates, and MLCC materials. Guosheng's main points are as follows: Since 2022, the growth rate of global chemical industry capital expenditure has slowed. In 2025, capital expenditure by major chemical companies declined further, and the pressure from capacity expansion has eased significantly. From 2022 to 2024, global chemical capital expenditure remained at around EUR 270 billion. In 2025, the combined capital expenditure of major chemical companies that disclosed data fell 7.8% to USD 67.67 billion. Slower demand growth, declining industry profitability and cash flow, and higher financing costs jointly reduced companies' willingness to make new investments. The decline in capital expenditure first affects projects that have not yet started construction and those in the early stages of construction. Earlier-stage projects will still form a short-term supply peak, while medium-term growth in new supply is expected to gradually decline. Global chemical capital expenditure is concentrating in Asia and regions with resource and industrial chain advantages. Asia's share of global chemical capital expenditure rose from 43.9% in 2004 to 70.4% in 2024, while Europe's share fell from 30.6% to 16.0% over the same period. From 2004 to 2024, global chemical capital expenditure increased by EUR 215.1 billion, of which China accounted for EUR 116.8 billion, contributing 54.3% of the increase. Asia, represented by China, has become an advantageous production location for the chemical industry. In addition, the United States and the Middle East are still advancing large-scale integrated projects with resource advantages; Europe and Northeast Asia are accelerating the closure of high-cost plants and base integration. From 2022 to 2025, announced shutdown capacity in Europe exceeded 37 million tons per year, while confirmed new project capacity during the same period was about 7 million tons per year. China's chemical industry investment intensity has already fallen from a high level, and corporate profitability has initially recovered. Fixed asset investment in China's chemical raw materials and chemical products manufacturing industry fell 8.0% in 2025 and continued to decline by 7.4% from January to July 2026. Although China's chemical asset utilization efficiency and finished goods inventory are still in the digestion stage, and the short-term impact of earlier construction projects on supply has not yet ended, this cycle has already shifted from capital expenditure expansion to contraction, and the supply-demand relationship is gradually improving. In the first half of 2026, the profit margin of the chemical raw materials and chemical products manufacturing industry rose from 4.2% in 2025 to 6.1%; the petroleum, coal, and other fuel processing industry rose from -0.2% to 1.6%, turning profitable; and the chemical fiber manufacturing industry rose from 3.0% to 4.4%. Geopolitical conflicts have shifted the chemical cycle from slowing new supply to a combination of effective supply contraction and inventory decline, accelerating the cyclical recovery of the chemical industry. Restricted shipping lanes, shutdowns of chemical plants in the Middle East, and damage to Russian refineries have respectively compressed energy transportation, refining processing, and chemical production. From the end of February to the end of July 2026, global observable oil inventories fell by a cumulative 410 million barrels. The U.S. chemical product inventory-to-shipments ratio fell from 1.61 in September 2025 to 1.50 in July 2026, reaching its lowest level since 2022. Although geopolitical conflicts have not improved end-user demand, they have shortened the time needed for supply-demand rebalancing and destocking. For products with limited new capacity, low inventories, and supply-demand already close to balance, price and profitability recovery may occur earlier. Risk warnings: macroeconomic and downstream demand fluctuation risk; risk of concentrated release of earlier-stage capacity; risk of exit and restart of existing facilities; risk of energy and chemical product price fluctuations; geopolitical and international trade risks.