Report Industry Investment Rating - Not provided in the given content Core Viewpoints - The market conditions of L plastic and PP polypropylene fluctuate daily, affected by factors such as geopolitical events, inventory levels, and检修情况. Different indicators like M1 - M2 scissors - difference, ZEW global auto industry index, and import - export data of raw salt have impacts on the market, leading to different trading strategies for L and PP contracts [1][2][5][6] Summary by Relevant Catalogs Market Conditions - **L Plastic**: - On 26 - 03 - 02, the L main 2605 contract closed at 6633 points, up 36 points or +0.55%. LLDPE market prices fluctuated, with a change range of 20 - 80 yuan/ton. Some traders actively sold goods, while some held back due to the Middle - East situation. Downstream factories made rigid purchases [1] - On 26 - 02 - 27, the L main 2605 contract closed at 6604 points, down 64 points or - 0.96%. LLDPE market prices slightly declined, with price drops in different regions [5] - On 26 - 02 - 26, the L main 2605 contract closed at 6758 points, down 19 points or - 0.28%. LLDPE market prices partially rose, but trading was light [9] - On 26 - 02 - 25, the L main 2605 contract closed at 6826 points, up 6 points or +0.09%. LLDPE market prices partially rose, and some downstream buyers made purchases [13] - On 26 - 02 - 24, the L main 2605 contract closed at 6644 points, down 90 points or - 1.34%. LLDPE market prices were stable, and there was little trading [16] - **PP Polypropylene**: - On 26 - 03 - 02, the PP main 2605 contract closed at 6641 points, up 30 points or +0.45%. The domestic PP market price center had a narrow adjustment, and afternoon trading was limited due to geopolitical factors [1] - On 26 - 02 - 27, the PP main 2605 contract closed at 6605 points, down 70 points or - 1.05%. The domestic PP market was partially weak, and downstream demand was limited [5] - On 26 - 02 - 26, the PP main 2605 contract closed at 6734 points, up 14 points or +0.21%. The domestic PP market still had some price increases, but downstream inquiries were weak [9] - On 26 - 02 - 25, the PP main 2605 contract closed at 6747 points, up 1 point or +0.01%. The spot market was boosted by the rise in crude oil prices, and downstream factories made some purchases [13] - On 26 - 02 - 24, the PP main 2605 contract closed at 6568 points, down 80 points or - 1.20%. The domestic PP market price changed little during the holiday, and trading was scarce [16] Important Information - On 26 - 03 - 02, the US and Israel launched a "pre - emptive" military strike against Iran on February 28, and Iran retaliated. Missile debris hit Dubai and Abu Dhabi, causing at least one death [1] - On 26 - 02 - 27, global refined oil demand will enter the end of growth in the "14th Five - Year Plan" period. China's refining and refined oil industry will enter the "transformation acceleration period" [5] - On 26 - 02 - 26, the 1000 - million - ton/year refining and chemical integration transformation and upgrading project of Yanchang Petroleum in Yan'an, with a total investment of 80.29 billion yuan, has completed pre - preparations and been submitted to the State Council for approval [9] - On 26 - 02 - 25, in 2025, the petrochemical industry achieved stable progress. Crude oil production increased for seven consecutive years, and natural gas production increased for nine consecutive years. However, industry investment and import - export trade volume decreased [13] - On 26 - 02 - 24, the EU's Waste Technical Adaptation Committee for the Single - Use Plastics Directive approved a draft implementation act regarding the accounting rules for recycled PET in plastic beverage bottles [16] Logical Analysis - In January, the domestic M1 - M2 scissors - difference was - 4.1%, slightly positive for commodities. As of last Friday, the registered warehouse receipts of the DCE L contract increased by 74.1% year - on - year, and those of the PP contract increased by 138.0% year - on - year. From February, PP port inventory has increased for three consecutive months [2] - In February, the ZEW global auto industry index dropped to - 7.2 points, slightly negative for commodities. In December 2025, the domestic raw salt import - export volume decreased by 46.0% year - on - year, negative for the chemical industry. The weekly maintenance loss of domestic LLDPE and PP increased, but the growth rate narrowed [6][10] - In December 2025, US auto and parts new orders increased by 11.4% year - on - year, positive for commodities. In January, the VXD index rose by 2.8% year - on - year, positive for the chemical industry. The monthly maintenance loss of LLDPE and PP increased, and the ratio of the two indicated that L was relatively strong [14] - As of the holiday, the registered warehouse receipts of the DCE L contract increased by 43.2% year - on - year, and those of the PP contract increased by 94.2% year - on - year. In January, the monthly maintenance loss of LLDPE increased by 37.1% year - on - year, positive for L [17] Trading Strategies - **26 - 03 - 02**: For the L main 2605 contract, try to go long at an appropriate time and set a stop - loss at 6550 points. For the PP main 2605 contract, stay on the sidelines [2] - **26 - 02 - 27**: For the L main 2605 contract, stay on the sidelines. For the PP main 2605 contract, hold short positions and set a stop - loss at 6700 points [6] - **26 - 02 - 26**: For the L main 2605 contract, stay on the sidelines. For the PP main 2605 contract, hold short positions and set a stop - loss at 6700 points [10] - **26 - 02 - 25**: For the L main 2605 contract, try to go long at an appropriate time and set a stop - loss at 6700 points. For the PP main 2605 contract, stay on the sidelines and pay attention to the pressure at 6770 points [14] - **26 - 02 - 24**: For the L main 2605 contract, stay on the sidelines and pay attention to the support at 6600 points. For the PP main 2605 contract, try shorting a small amount and set a stop - loss at 6620 points [17]

Core Viewpoint - Zhejiang Petrochemical Co., Ltd. is advancing its integrated refining and chemical project, marking a significant step in the "reduce oil and increase chemicals" strategy, with a focus on self-sufficient technology across the entire industrial chain [2][3]. Group 1: Project Overview - The project includes the construction of key facilities such as a 400,000 tons/year POE polyolefin elastomer unit and a 700,000 tons/year LDPE/EVA unit, which are pivotal for the refining industry's transformation [2]. - The project is located in the Zhoushan Green Petrochemical Base and involves the establishment of multiple new production units, including a continuous reforming unit and various separation units [2][4]. Group 2: Production Capacity and Strategy - After the project completion, the crude oil processing capacity will remain at 40 million tons/year, with PX capacity at 8.8 million tons/year and ethylene capacity at 4.2 million tons/year, indicating stability in existing operations [3]. - The project aims to extend the downstream chemical industry chain by utilizing surplus products like benzene and acetone to develop high-end chemical and new material products, facilitating a structural adjustment towards high-value offerings [3]. Group 3: Technological Advancements - The project emphasizes the development of a complete technological system from basic raw materials to high-end polyolefins, addressing the domestic technological gap in high-end materials production [2]. - The integration of self-developed α-olefin and tubular LDPE/EVA processes is central to this technological advancement, aligning with the material needs of industries such as photovoltaics and new energy vehicles [2].

Core Viewpoint - The transformation and upgrading project of Jilin Petrochemical has significantly increased its ethylene production capacity to 1.9 million tons per year, positioning it among the top players in China's midstream sector [1] Group 1: Production Capacity and Industry Position - Jilin Petrochemical's ethylene total capacity has risen to 1.9 million tons per year, enhancing its status in the domestic midstream sector [1] - The oil-to-chemical conversion capability has been notably strengthened, establishing a comprehensive industrial layout for refined chemical materials [1] Group 2: Growth Strategies - The company is focusing on a dual growth curve strategy, consolidating and expanding its first growth curve by emphasizing "reducing oil and increasing chemicals" and "green low-carbon" initiatives [1] - Jilin Petrochemical has constructed 28 new and upgraded major process units while maintaining its crude oil processing volume, creating a unique industrial layout and opening new development pathways [1] Group 3: Innovation and New Markets - The company is accelerating the development of strategic emerging industries such as new materials, fine chemicals, and bio-manufacturing [1] - By leveraging its "1+4" technology innovation system, Jilin Petrochemical is integrating technological and industrial innovation, focusing on core technology breakthroughs and ensuring a full chain from innovation to value creation [1] Group 4: Production and Brand Impact - Post-transformation, Jilin Petrochemical's annual product output has exceeded 20 million tons, with a continuous increase in the proportion of high-end products [1] - The brand influence of Jilin Petrochemical is growing steadily as it enhances its product offerings and market presence [1]

Core Viewpoints - The petrochemical industry is currently facing significant "involution" competition, leading to a situation where increased production does not result in increased profits, with the industry's operating income profit margin declining from 8.03% in 2021 to 4.85% in 2024 [2][17] - The report recommends investment directions in oil and gas, refining and chemical, potash fertilizer, and phosphorus chemicals, anticipating a gradual recovery in profitability as supply-side reforms take effect [4][21] Supply Side - Fixed asset investment in the chemical raw materials and products manufacturing sector turned negative starting June 2025, indicating the end of the current expansion cycle, with the "anti-involution" policy introduced in July aimed at curbing low-price competition and promoting the orderly exit of outdated capacity [2][19] - The report expects stricter approval for new chemical product capacities and accelerated clearance of outdated capacities, effectively alleviating the oversupply issue in the petrochemical industry [19][20] Demand Side - Traditional demand is expected to recover moderately due to global central banks entering a rate-cutting cycle and fiscal stimulus, while emerging demands from sectors like renewable energy and AI will drive the need for key chemical materials [3][19] - The report highlights that China's chemical products account for over 40% of global sales, and with overseas capacity being cleared, Chinese chemical companies are expected to gain market share globally [20] Oil Price Outlook - Geopolitical risks have led to fluctuations in international oil prices, with Brent and WTI prices rising by 16.17% and 13.57% respectively by the end of January 2026 [4][21] - The report forecasts Brent oil prices to stabilize between $55-65 per barrel and WTI prices between $52-62 per barrel in 2026, influenced by OPEC+ production decisions and high operational costs in the U.S. shale oil sector [22][30] Key Industry Research - The refining and chemical sector is expected to see improvements in supply-demand dynamics, with the report suggesting a focus on companies like China Petroleum and Rongsheng Petrochemical for potential recovery in refining profits [7][22] - In the potash fertilizer sector, the report recommends Yara International, which has significant potash reserves and is expected to increase production capacity significantly by 2026 [8][22] - The phosphorus chemical sector is anticipated to benefit from increased demand driven by energy storage applications, with a recommendation for Chuanheng Co. due to its strong resource base [23][24] Investment Portfolio - The recommended investment portfolio includes China Petroleum, China National Offshore Oil Corporation, Rongsheng Petrochemical, Yara International, and Chuanheng Co., highlighting their competitive advantages and growth potential in the current market environment [24][25]

Core Viewpoints - The petrochemical industry is currently facing significant "involution" competition, leading to a situation where increased production does not translate into higher profits, with the industry's operating income profit margin declining from 8.03% in 2021 to 4.85% in 2024 [2][17] - The report recommends investment directions in oil and gas, refining and chemical, potash fertilizer, and phosphorus chemicals, anticipating a gradual recovery in profitability as supply-side reforms take effect [4][21] Supply Side - Investment in fixed assets in the chemical raw materials and products manufacturing sector turned negative starting June 2025, indicating the end of the current expansion cycle, with the "anti-involution" policy introduced in July aimed at curbing low-price competition and promoting the orderly exit of outdated capacity [2][19] - The report expects stricter approval for new chemical product capacities and accelerated clearance of outdated capacities, effectively alleviating the oversupply issue in the petrochemical industry [19][20] Demand Side - Traditional demand is expected to recover moderately due to global central banks entering a rate-cutting cycle and fiscal stimulus, while emerging demands from sectors like renewable energy and AI will drive the need for key chemical materials [3][19] - The report highlights that China's chemical products account for over 40% of global sales, and with overseas capacity being cleared, Chinese chemical companies are expected to gain market share globally [20] Oil Price Outlook - Geopolitical risks have led to fluctuations in international oil prices, with Brent and WTI prices rising by 16.17% and 13.57% respectively by the end of January 2026 [4][21] - The report forecasts Brent oil prices to stabilize between $55-65 per barrel and WTI prices between $52-62 per barrel in 2026, influenced by OPEC+ production decisions and high operational costs in the U.S. shale oil sector [22][30] Key Industry Research - The refining and chemical sector is expected to see improvements in supply-demand dynamics, with the report suggesting that the "anti-involution" policy will effectively optimize the supply side, particularly in the refining sector [22][32] - The potash fertilizer sector is highlighted for its potential growth, with companies like Asia Potash International expected to expand production significantly, reaching 400,000 tons by 2026 [8][22] - The phosphorus chemical sector is anticipated to benefit from increased demand driven by energy storage applications, with companies like Chuanheng Co. expected to maintain high prices for phosphorus ore [23][24]

Core Viewpoint - The petrochemical sector is experiencing mixed performance, with the China Petroleum and Chemical Industry Index showing a slight decline, while the Petrochemical ETF has seen significant inflows and growth in net value over the past two years [1][2]. Group 1: Market Performance - As of January 29, 2026, the China Petroleum and Chemical Industry Index decreased by 0.27%, with stocks like Sankeshu and Zhongfu Shenying leading gains, while companies like Hebang Bio and China Petroleum faced declines [1]. - The Petrochemical ETF (159731) fell by 0.47%, with a latest price of 1.05 yuan and a trading volume of 2.12 billion yuan, indicating active market participation with a turnover rate of 17.99% [1]. Group 2: Fund Flows and Performance Metrics - The Petrochemical ETF has seen continuous net inflows for 16 days, totaling 838 million yuan, with the latest share count reaching 1.106 billion and a total scale of 1.166 billion yuan, marking a new high [2]. - Over the past two years, the net value of the Petrochemical ETF has increased by 66.80%, with the highest single-month return recorded at 15.86% and the longest consecutive monthly gain spanning 8 months, achieving a maximum increase of 41.6% [2]. - The average return during the rising months of the Petrochemical ETF is 5.25%, and as of January 23, 2026, the one-year Sharpe ratio stands at 2.22 [2]. Group 3: Industry Trends and Outlook - According to Guosen Securities, the petrochemical sector is strictly implementing capacity reduction and replacement requirements for new refining projects, focusing on upgrading old facilities and demonstrating new technologies [2]. - The refining capacity in China is approaching the policy threshold of 1 billion tons, leading to the gradual consolidation and elimination of smaller capacities, while larger refineries are expected to increase their market share, optimizing the industry structure [2]. - With limited growth in refined oil demand, the transition towards "reducing oil and increasing chemicals" will be essential for refineries [2]. Group 4: Key Stocks in the Index - The top ten weighted stocks in the China Petroleum and Chemical Industry Index as of December 31, 2025, include Wanhua Chemical, China Petroleum, and China Petrochemical, collectively accounting for 56.73% of the index [2].

Group 1 - The core viewpoint of the article highlights the positive performance of the petrochemical ETF (159731), which has seen a 1.26% increase, with significant contributions from stocks like Zhejiang Longsheng and Baofeng Energy [1] - The petrochemical ETF has experienced a continuous net inflow of funds for 15 trading days, accumulating a total of 745 million yuan, reaching a new high in both share count (1.018 billion shares) and total scale (1.045 billion yuan) since its inception [1] - Guosen Securities notes that the Ministry of Industry and Information Technology has issued a growth stabilization plan for the petrochemical industry, indicating a steady shift from oil to chemicals [1] Group 2 - International oil prices are fluctuating within a narrow range, with Saudi Arabia reducing the official selling price (OSP) for Asia, which is expected to alleviate cost pressures on domestic refineries [1] - The forecast for Brent crude oil prices is projected to fluctuate between 55-65 USD per barrel by 2026, aligning with refinery cost comfort zones [1] - The petrochemical ETF closely tracks the CSI Petrochemical Industry Index, with over 91% of its weight concentrated in the basic chemicals and oil & petrochemical sectors, including major state-owned oil companies [1]

Core Viewpoint - The refining and chemical sector is expected to see a mid-term recovery in profitability due to supply-side policy restrictions, structural optimization, and rapid growth in emerging oil products like SAF, with key recommendations for leading domestic refining and chemical companies [1] Group 1: Policy and Industry Trends - The Ministry of Industry and Information Technology has issued a growth stabilization plan for the petrochemical industry, emphasizing "reducing oil and increasing chemicals" and controlling new refining capacity [1] - By September 2025, the plan aims to prevent overcapacity in coal-to-methanol and support the transformation of aging petrochemical facilities [1] - The refining capacity in China is approaching the policy limit of 1 billion tons, leading to the gradual elimination of smaller capacities and an increase in the proportion of large-scale refineries [1] Group 2: Cost and Pricing Dynamics - International oil prices are expected to fluctuate between $55-65 per barrel by 2026, aligning with refinery cost comfort zones, aided by Saudi Arabia's recent reductions in OSP prices [2] - The cost structure for refining is improving due to lower OSP prices and increased domestic refinery operating rates, despite geopolitical uncertainties [2] Group 3: Profitability and Market Conditions - Although demand for refined oil products is slowing, the supply-side restrictions and cost improvements are leading to an upward shift in the crack spread, enhancing refinery profitability [3] - The PX and PTA sectors are experiencing a recovery in profitability due to zero expansion in PX capacity and increasing demand from downstream industries [4] Group 4: Emerging Markets and Future Opportunities - The sustainable aviation fuel (SAF) market is projected to grow significantly, with the EU setting a target for SAF blending ratios to exceed 70% by 2050, indicating a demand potential of over 40 million tons [5] - China's SAF production capacity is expected to increase rapidly, potentially filling global supply gaps as SAF becomes a new growth area post-peak oil demand [5] Group 5: Sulfur Market Dynamics - Sulfur prices are rising significantly due to tight supply and increasing demand from the fertilizer and renewable energy sectors, which will enhance the profitability of refining and chemical companies [6] - Recent price increases for sulfur in Qatar and the UAE indicate a strong upward trend, benefiting companies with substantial sulfur production capacities like Sinopec and PetroChina [6]

Investment Rating - The report maintains an "Outperform" rating for the refining and chemical industry [10] Core Views - The refining and chemical industry is expected to experience a mid-term profit recovery due to long-term supply contraction and declining costs [1] - The Ministry of Industry and Information Technology has issued a growth stabilization plan for the petrochemical industry, emphasizing the "reduce oil and increase chemicals" strategy [1][19] - The global oil price is projected to fluctuate within a comfortable range for refineries, with Brent crude oil expected to stabilize between $55 and $65 per barrel by 2026 [2] - The sustainable aviation fuel (SAF) market is anticipated to grow significantly, becoming a new source of demand after the peak of traditional oil products [4] Summary by Sections Industry Growth and Policy - The petrochemical industry is a crucial pillar of the national economy, with a target of over 5% annual growth in value added from 2025 to 2026 [19] - The industry is approaching a policy control line of 1 billion tons in refining capacity, leading to the gradual consolidation and elimination of smaller capacities [20][21] - The focus is on optimizing the structure of the industry, with support for the transformation of aging facilities and the demonstration of new technologies [1][19] Cost and Profitability - Recent adjustments in oil prices and the reduction of official Saudi oil prices (OSP) are expected to alleviate cost pressures on domestic refineries [2] - Despite a slowdown in demand growth for refined oil products, the profit margins for refineries are expected to improve due to structural optimization and cost reductions [2][8] Chemical Products and Market Dynamics - The supply-demand structure for PX and PTA is improving, with no new PX capacity expected until 2026, leading to increased profitability in the refining and chemical sectors [3] - The SAF market is projected to have a demand space exceeding 40 million tons by 2050, with significant capacity development expected in China [4][8] Key Companies and Recommendations - Key companies recommended for investment include China Petroleum, Rongsheng Petrochemical, and Tongkun Co., with strong positions in refining and chemical production [9][10] - China Petroleum is noted for its extensive refining capacity and integrated operations across the oil and gas value chain [9] - Rongsheng Petrochemical leads in PX and PTA production, benefiting from improved profitability in the aromatic and polyester chains [9]

Investment Rating - The report maintains an "Outperform" rating for the refining and chemical sector [1][8][10]. Core Insights - The refining and chemical industry is undergoing a structural transformation driven by supply constraints and cost reductions, leading to a mid-term recovery in refining and petrochemical profits [1][8]. - The Ministry of Industry and Information Technology has issued a growth plan for the petrochemical industry, emphasizing the need for capacity control and the promotion of "reducing oil and increasing chemicals" as a necessary transformation path for refineries [1][19]. - The international oil price is expected to fluctuate within a comfortable range for refineries, with Brent crude oil projected to stabilize between $55 and $65 per barrel by 2026 [2][38]. - The demand for refined oil products is slowing down, but the structural optimization in supply and declining costs are expected to improve refining margins [2][8]. Summary by Sections Industry Growth and Policy - The petrochemical industry is a crucial pillar of the national economy, with a target of over 5% annual growth in value added from 2025 to 2026 [19][21]. - The industry is approaching a policy control line of 1 billion tons in refining capacity, leading to the gradual elimination of smaller, less efficient capacities [20][21]. Refining Costs and Profitability - Recent adjustments in Saudi OSP prices and improvements in VLCC freight rates are expected to alleviate cost pressures on domestic refineries [2][8]. - The overall refining margin is anticipated to improve due to a combination of limited supply growth and structural optimization initiatives [2][8]. PX and PTA Market Dynamics - The supply-demand structure for PX and PTA is improving, with no new PX capacity expected in 2024-2025, leading to a significant increase in PX price spreads [3][8]. - PTA processing fees have also risen, indicating a recovery in profitability for the refining sector [3][8]. Sustainable Aviation Fuel (SAF) Market - The SAF market is projected to grow significantly, with the EU setting a target for SAF blending ratios to exceed 70% by 2050, creating a demand gap that Asia-Pacific countries, including China, are expected to fill [4][8]. - China's SAF production capacity is anticipated to increase rapidly, contributing to the overall growth of the refined oil market post-peak [4][8]. Key Company Recommendations - The report recommends investing in leading domestic refining and petrochemical companies, including China Petroleum, Rongsheng Petrochemical, and Tongkun Co., which are expected to benefit from the recovery in refining margins [8][9][10].