EBSCN·2025-07-27 11:10Investment Rating - The report maintains an "Accumulate" rating for the basic chemical industry [5] Core Views - The chemical industry is expected to undergo a new round of supply-side reforms, driven by the government's initiatives to eliminate outdated production capacity and improve industry structure [1][21] - The "anti-involution" policy is anticipated to support the exit of old capacities, benefiting leading companies in sub-industries such as refining, fertilizers, pigments, organic silicon, soda ash, and chlor-alkali/PVC [1][21] Summary by Sections Refining - Strict control of refining capacity and low operating rates of local refineries in Shandong are expected to improve the profitability of major refineries [2][24] - As of 2024, China's refining capacity is projected to be 934 million tons, with a target to keep crude oil processing capacity below 1 billion tons by 2025 [24][25] Urea - Future supply is expected to decrease, with only 493,000 tons of new urea capacity projected by 2025, representing 6.5% of the current total capacity [2][26] - The industry is likely to benefit from supply reductions and potential export opportunities, particularly for leading companies capable of upgrading their facilities [26] Soda Ash and PVC - Increased demand from infrastructure projects is expected to drive recovery in the soda ash and PVC markets [3][27] - New soda ash capacity planned for 2025-2026 is estimated at 868,000 tons, accounting for 20% of the total capacity in 2024 [28] - The PVC industry is also expected to see limited new capacity, with a projected increase of 500,000 tons by 2025-2026, representing 17% of the total capacity in 2024 [29] Investment Recommendations - The report suggests focusing on leading companies in various sub-industries, including: - Refining: China Petroleum, Sinopec, Hengli Petrochemical, Rongsheng Petrochemical, Dongfang Shenghong [4] - Fertilizers: Hualu Hengsheng, Chuanheng Co., Hubei Yihua, Salt Lake Potash, Yara International, Sinochem Fertilizer [4] - Pigments: Qicai Chemical, Baihehua, Xinkai Technology, Zhejiang Longsheng, Runtu Co. [4] - Chlor-alkali/PVC: Yangmei Chemical, Chlor-alkali Chemical, Xinjiang Tianye [4] - Organic Silicon/Industrial Silicon: Hoshine Silicon, Xin'an Chemical, Silbond Technology [4] - Soda Ash: Sanyou Chemical, Boyuan Chemical, Shandong Haihua [4]