Core Viewpoint - The domestic chemical industry is currently experiencing low price indices, profit margins, and valuations, but there are expectations for positive changes in supply due to declining capital expenditures, accelerated exit of outdated overseas capacities, and government policies emphasizing "anti-involution" [1][3][33]. Group 1: Industry Downturn and Financial Metrics - The chemical industry has been in a downturn for approximately three years, with profit margins at low levels. From early 2025 to now, the chemical product price index has decreased by 6.4%, currently at the 15.6% percentile since 2012 [3][9]. - The profit margin for chemical raw materials and products from January to May 2025 is 4.10%, the lowest since 2017. In Q1 2025, the gross and net profit margins for petrochemical companies were 15.83% and 5.07%, respectively, also at low levels [3][9]. - Capital expenditures in the petrochemical sector continue to decline, with a year-on-year decrease of 18.3% in 2024 and 18.5% in Q1 2025 [3][14]. Group 2: Global Demand and Trade Impacts - Global demand for bulk chemical products remains weak, with the real estate sector's adjustment gradually narrowing its economic drag, but still affecting demand growth for chemicals related to real estate and its downstream sectors [4][23]. - The U.S. has raised import tariffs on most chemical products by 30%, which has suppressed some direct exports of chemicals to the U.S. If these tariffs remain, they may disrupt future chemical exports from China [4][28]. Group 3: Supply Dynamics and Capacity Exits - The exit of outdated overseas chemical capacities is accelerating, with a total of 11 million tons of capacity expected to exit in Europe from 2023 to October 2024. This includes significant closures announced by companies like Westlake Chemical and Total [3][20]. - The exit of overseas chemical capacities is expected to help alleviate global supply-demand imbalances in related chemical products [3][20]. Group 4: Investment Opportunities and Strategies - The chemical industry is at a low point in terms of profitability and valuation, with the ROE for the basic chemical sector at its lowest since 2017. As of July 11, 2023, the price-to-book ratio for the basic chemical sector is 2.10x, at the 21% percentile since 2012 [33]. - The company sees potential in low-valuation chemical leaders with strong profit growth certainty for 2026, as well as investment opportunities in bottomed-out supply-concentrated products [37][38].