Core Insights - The chemical industry in China has been under pressure since 2022, with the chemical product price index declining from an average of 6000 points in May 2022 to 3851 points by November 2025, a decrease of 35.81% [2][10] - Despite a slight increase in revenue for large industrial enterprises in the chemical sector, profits have been declining, with total profits dropping from 730.2 billion yuan in 2022 to 469.42 billion yuan in 2023, and further down to 425.01 billion yuan in 2024 [2][12] - The report emphasizes the importance of focusing on companies with stable profits and strong dividend capabilities during the industry's cyclical downturn [4] Industry Overview - The chemical industry has shown a characteristic of "increased revenue but decreased profits," indicating a significant supply-demand imbalance and pressure on profitability [23] - The average profit margin for the chemical raw materials and products manufacturing sector has dropped from 9-10% in 2021-2022 to an average of 4.8% in 2023 and further down to 3.9% in the first three quarters of 2025 [24][29] - Different segments within the industry have shown varied performance, with agricultural chemicals showing resilience while chemical fibers and raw materials continue to decline [32][33] Capacity Expansion and Investment - Fixed asset investment in the chemical industry has seen significant growth from 2021 to 2024, although the growth rate is expected to slow down in 2025 [60][66] - The report notes that the return on equity (ROE) for the basic chemical sector has declined significantly, from 14.61% in 2021 to 5.95% in 2023, indicating a decrease in investment returns [74][75] Focus on Dividend Stability - Companies with stable earnings, strong cash flow, and a high willingness to distribute dividends are highlighted as having greater investment value during the industry's downturn [4] - A selection of 22 basic chemical companies meeting criteria for profitability, cash flow, and dividend yield has been identified as key investment targets [4] Segment Analysis - The agricultural chemicals segment has maintained a relatively stable profit margin, particularly in potassium fertilizers, which saw margins rise to 60% in 2025 [36] - The chemical fiber segment has experienced a downward trend in profit margins, with polyester showing a consistent decline since 2020 [40] - The rubber products segment, particularly tires, has shown an opposite trend, with net margins gradually increasing during the industry downturn [53]

Core Viewpoint - The article discusses the recent changes in tariffs on rubber and tire imports to the United States, highlighting that while tariffs on certain Chinese tires remain unchanged, other products have seen a reduction in tariffs, which may have limited impact on the overall market due to low export volumes from China [2][5]. Tariff Modifications - Tariffs on Chinese passenger car and light truck tires remain at 25%, while other Chinese tires have been reduced to 10% (with a 24% rate paused for 90 days) [2][3]. - For Southeast Asian tires, tariffs remain unchanged at 25% for passenger and light truck tires, and 0% for other types [2]. Impact on Rubber Products - The reduction in tariffs for Chinese rubber products is down to 10% from a previous 24% [3]. - The actual volume of Chinese tires exported to the U.S. is low, with only 310,000 tons expected in 2024, translating to a mere 50,000 tons of rubber, indicating that tariff changes may not significantly affect rubber consumption [4]. Market Reactions and Expectations - The market has experienced a decline of 2,000 points, primarily driven by recession expectations and long positions being liquidated, rather than the direct impact of the 232 tariff [5][9]. - There is a noted decrease in bullish sentiment due to changes in underlying market logic, with supply exceeding market expectations [5][10]. Supply and Demand Dynamics - The supply from major rubber-producing countries like Thailand and Indonesia has shown a year-on-year increase of over 10%, contradicting previous expectations of supply constraints [11]. - The article suggests that the basic logic of a long-term supply-demand gap may need to be reassessed based on current supply data [10]. U.S. Demand and Economic Indicators - U.S. freight demand has been weak, with cargo volumes near historical lows, which correlates with overall economic performance and PMI levels [18]. - The article emphasizes the need to monitor terminal demand changes and how companies respond to tariff impacts, as these factors will influence inventory cycles [18]. International Tire Manufacturers' Perspectives - Major international tire manufacturers, such as Goodyear and Michelin, have expressed concerns about increased costs due to tariffs, estimating potential annual costs of $300 million, which they plan to pass on to consumers [29][32]. - There is an expectation that the effects of tariffs on tire imports may not be fully realized until the third quarter of the year [30]. Conclusion - The overall sentiment among international tire manufacturers is pessimistic regarding the impact of trade wars on tire and automotive demand, with expectations of reduced production in North America [32][33].