1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The cost support for pure benzene is strengthening due to factors such as potential production load reduction and geopolitical concerns affecting crude oil prices. The supply of styrene is returning in February, but the fundamentals are weakening, and the downstream demand feedback of the styrene industry chain is limited [10][42][66]. - With the slowdown of refining and chemical production capacity expansion in China, the new production capacity of pure benzene will slow down in the future, and the new capacity in 2026 is mainly concentrated in the first half of the year, roughly matching the commissioning time of new styrene plants [10]. - The global styrene industry is facing the dual pressures of capacity expansion and demand contraction, and the profit space is continuously squeezed. However, the shutdown of some foreign styrene plants is beneficial for exports [49]. 3. Summary by Relevant Catalogs 3.1 Fundamental Situation 3.1.1 Pure Benzene Cost Support Strengthens - At the beginning of 2026, pure benzene broke through the bottom - shock range. The collective rise of aromatic products is the result of the resonance of cost support, supply disturbances, and macro - sentiment. The long - term production load of pure benzene may be affected by the news of full - scale consumption tax collection in the naphtha circulation link [10]. - In the first quarter, the new pure benzene production capacity is 300,000 tons. In the future, the new production capacity of pure benzene will slow down, and the new capacity in 2026 is mainly concentrated in the first half of the year. The import volume of pure benzene is expected to decrease month - on - month in January - February due to the US tariff on South Korean aromatics [10]. - In February, the operating load of domestic petroleum benzene returned to over 80%, while the load of hydro - benzene decreased compared with January. Some plants have restart plans, and the inventory of pure benzene is still high [11]. - The escalation of the US - Iran situation provides support for crude oil prices, strengthening the cost support for pure benzene [11]. 3.1.2 The Weekly Weighted Operating Load of Pure Benzene Downstream Increased in January - As of the 19th of February, the weekly weighted operating load of pure benzene downstream was 76.98%, a month - on - month increase. The operating rates of aniline and adipic acid increased month - on - month, while the load of caprolactam plants decreased, and the spot supply was tight. Phenol - acetone enterprises had serious losses, but the industry operating rate was relatively high [23]. 3.1.3 Styrene Supply Returned in February, and the Fundamentals Weakened - In 2026, the planned new styrene production capacity in China is 700,000 tons, with a capacity growth rate dropping to around 3%. In February, the styrene industry was profitable, and the load increased month - on - month due to the restart of some plants [42]. - The port inventory of styrene increased seasonally, but the increase was lower than expected. The supply - demand structure of styrene weakened during the Spring Festival [43]. - The global styrene industry is facing capacity expansion and demand contraction, and many domestic and foreign production plants have reduced production or shut down. Some foreign plants' shutdowns are beneficial for exports [49]. 3.1.4 The Demand Feedback of the Styrene Industry Chain Downstream was Limited - During the Spring Festival, the operating rates of EPS, ABS, and PS downstream of styrene decreased month - on - month. The procurement demand of small and medium - sized downstream enterprises may gradually weaken, and the transaction volume is difficult to increase effectively [66]. - The supply - demand fundamentals of the three S products (EPS, ABS, PS) are still weak. The demand of ABS is expected to weaken due to seasonal factors, the willingness of EPS downstream to receive goods at high prices may continue to decline, and the supply - demand pressure of PS still exists [66]. 3.2 Market Outlook and Strategy Recommendations - The new production capacity of pure benzene in the first quarter is 300,000 tons, and the new capacity will slow down in the future. The import volume of pure benzene is expected to decrease month - on - month in January - February. The styrene industry is profitable, but the profit space is squeezed. Some foreign plant shutdowns are beneficial for exports [75][76]. - Strategy Recommendations: - Unilateral: Buy on dips after a pull - back. Without the cooperation of cost - side crude oil drivers, the upward driving force is not strong [77]. - Arbitrage: Pay attention to positive arbitrage opportunities and shrink the EB - BZ spread when the price is high [77]. - Options: Wait and see [77].

Core Viewpoint - The liquor prices are expected to experience negative year-on-year growth in both 2024 and 2025, marking the first occurrence of such a trend since 2015 [4]. Group 1: Price Trends - In 2025, the Consumer Price Index (CPI) is projected to have a cumulative year-on-year increase of 0%, indicating no overall price change compared to 2024 [2]. - The liquor category specifically is forecasted to see a year-on-year price decline of 1.9% in 2025, following a decline of 1.4% in 2024 [3][4]. - The overall trend in food prices shows that while some categories like seafood and fresh fruits have positive growth, major categories including grains, liquor, and meat are experiencing negative growth [2][3]. Group 2: Economic Context - The economic environment is characterized by a cycle of demand contraction leading to supply adjustments, which in turn exacerbates economic slowdown [5]. - The Central Economic Work Conference in December 2025 emphasized the importance of stabilizing economic growth and ensuring reasonable price recovery through various monetary policy tools [5]. - Structural improvements in prices are noted, but there are concerns regarding the sustainability of these improvements, as they are influenced by factors such as strong pork supply and weak oil prices [5]. Group 3: Future Outlook - For 2026, continued price improvement will require multifaceted efforts to enhance consumer capacity, curb low-price competition, and boost confidence among microeconomic entities [6].

Group 1 - The non-manufacturing business activity index for July is 50.1%, a decrease of 0.4 percentage points from the previous month, but still above the critical point, indicating continued expansion in the sector [9] - The comprehensive PMI output index for July is 50.2%, down 0.5 percentage points from last month, yet remains above the critical point, suggesting that overall production and business activities in China are maintaining expansion [4] - The manufacturing PMI for July has slightly decreased to 49.3%, remaining below the critical point, indicating ongoing economic downward pressure [7] Group 2 - The new orders index in the manufacturing PMI has dropped by 0.8 percentage points to 49.4%, entering the contraction zone, reflecting a potential weakening in market demand [8] - The production index stands at 50.5%, down 0.5 percentage points, while the supplier delivery time index is at 50.3%, up 0.1 percentage points, indicating mixed signals in manufacturing activity [7] - The construction activity index for July is 50.6%, a decrease of 2.2 percentage points, influenced by adverse weather conditions affecting construction activities [9] Group 3 - Analysts suggest that the decline in manufacturing PMI is primarily due to weakened external demand and a slowdown in domestic consumption growth, particularly in the real estate market [8][10] - The prices of major raw materials have shown improvement, with the purchasing price index rising to 51.5%, marking the first increase above the critical point since March [8] - The overall economic outlook indicates a need for increased macroeconomic policy adjustments to counteract the downward pressure observed in both manufacturing and non-manufacturing sectors [10][11]

Economic Growth and Demand - China's GDP grew by 5.3% year-on-year in the first half of the year, showing resilience despite a complex internal and external environment [2] - Investment growth rate decreased from 4.2% in Q1 to 2.8% in H1, below last year's annual growth rate of 3.2% [2] - Consumer spending increased from 4.6% to 5% year-on-year, but June's growth of 4.8% was a decline from May [2] Price Levels and Market Dynamics - June's CPI rose by 0.1% year-on-year, significantly below the 2% annual target, while PPI's decline expanded from -2.2% to -3.6% [3] - The persistent low price levels indicate a significant supply-demand imbalance, leading to reduced confidence among businesses and consumers [3][4] - Market mechanisms are exacerbating demand contraction, as low prices lead to cautious investment and consumption behaviors [3][4] Investment Trends - Investment growth in Q2 showed a notable decline, influenced by falling market prices and cautious corporate outlooks [7] - Real estate investment fell by 11.2% year-on-year in H1, with a 9.9% decline in Q1, reflecting weak demand and market sentiment [7][8] - The manufacturing sector's investment growth decreased due to negative expectations regarding future sales and profitability [7] Government Role and Policy Recommendations - The government is urged to increase public investment to counteract demand contraction and stimulate economic growth [9][11] - There is a need for a proactive macroeconomic policy to address the prolonged demand contraction and its underlying issues [9][10] - The government has the capacity to enhance public goods and services, which can effectively stimulate demand and support economic recovery [10][12]