Core Viewpoint - The current market changes are primarily driven by unexpected demand, with additives set to benefit from both volume and structural growth, alongside limited supply, indicating a potential bottoming out and upward momentum in the industry [1] Demand Side - The global demand for VC additives is projected to grow significantly, with global power battery shipments expected to reach 1,447 GWh by 2026, maintaining a stable growth rate of around 20% [3] - Domestic and international demand is expected to resonate, with energy storage demand anticipated to exceed expectations, leading to a projected 62% year-on-year growth in global energy storage battery shipments to 822 GWh by 2026 [3] - The overall lithium battery market (including power, storage, and consumer) is expected to expand by 31% by 2026, directly driving the growth of the electrolyte additive market, representing a "demand growth impact" [3] - Structural changes, such as faster growth in energy storage and an increasing share of overseas lithium iron phosphate, are expected to lead to a 64% growth in VC demand by 2026, representing a "demand growth double impact" [3] - FEC is expected to benefit from advancements in fast-charging technology and silicon-based anode technology, with a projected demand growth rate of 29.5% by 2026 [3] Supply Side - The additive industry has experienced over three years of decline, with irrational expansion leading to intense competition and rapid price declines, resulting in cash losses for listed companies in 2024 [4] - Major companies' cash reserves have dropped to historical lows, limiting their willingness to expand production, leading to a more rational industry environment [4] - The low pricing environment is accelerating the exit of underperforming capacities, while downstream electrolyte companies may exhibit stronger purchasing needs due to supply shortages, enhancing price elasticity [4] - The estimated capacity gap for VC in 2026 is projected to reach -16,000 tons, indicating a supply tightness of approximately 15.1%, which is expected to persist throughout the year [4] - FEC is expected to remain in a tight balance, with potential for rapid growth if downstream technologies exceed expectations [4] - Under certain conditions, if VC prices stabilize at 150,000 yuan/ton and FEC at 60,000 yuan/ton, the latest valuations for industry-leading companies are below 12x, indicating a strong safety margin [4]

Core Viewpoint - The current market changes are primarily driven by unexpected demand, with additives set to benefit from both volume and structural growth, alongside limited supply, indicating a potential recovery in the industry [1] Demand Side: Structural Differences Leading to "Growth Double Hit" - The global demand for VC additives is projected to grow significantly, with global power battery shipments expected to reach 1,447 GWh by 2026, maintaining a stable growth rate of around 20% [2] - Domestic and international demand is expected to resonate, with global energy storage battery shipments anticipated to increase by 62% year-on-year to 822 GWh by 2026 [2] - The overall lithium battery market (including power, storage, and consumer) is expected to expand by 31% by 2026, directly driving the growth of the electrolyte additive market, representing the first "demand growth hit" [2] - The structural growth is further enhanced by faster growth in energy storage and an increasing share of lithium iron phosphate batteries overseas, leading to a projected 64% demand growth for VC by 2026, representing a "demand growth double hit" [2] - FEC is expected to benefit from advancements in fast-charging technology and silicon-based anode technology, with a projected demand growth rate of 29.5% by 2026 [2] Supply Side: Limited Capacity Expansion and Production Constraints - The additive industry has experienced over three years of decline, with irrational capacity expansion leading to intense competition and rapid price declines, resulting in cash losses for listed companies in 2024 [3] - Current profitability and capital conditions limit companies' willingness to expand capacity, leading to a more rational industry environment, while low prices accelerate the exit of outdated capacities [3] - The demand for inventory replenishment from downstream electrolyte companies may create stronger purchasing needs, enhancing price elasticity [3] - The estimated capacity gap for VC in 2026 is projected to reach -16,000 tons, indicating a supply tightness of approximately 15.1%, which is expected to persist throughout the year [3] - FEC is expected to remain in a tight balance, with potential for rapid growth if downstream technologies exceed expectations [3] - Under certain conditions, if VC prices stabilize at 150,000 yuan/ton and FEC at 60,000 yuan/ton, the latest valuations for industry-leading companies are below 12x, indicating a strong safety margin [3]

Investment Rating - The report maintains a "Positive" investment rating for the chemical industry [11] Core Insights - The chemical industry achieved a revenue of 1,947.86 billion yuan in Q1-Q3 2025, representing a year-on-year growth of 2.1%, while net profit attributable to shareholders was 115.78 billion yuan, up 4.4% year-on-year [2][18] - In Q1-Q3 2025, 50.0% of the 30 chemical sub-industries reported year-on-year growth, increasing to 56.7% in Q3 2025 [2][28] - The report highlights a gradual recovery in the industry, with capital expenditures declining by 16.9% and 2.7% in 2024 and 2025 respectively, indicating a slowdown in expansion cycles [2][18] Summary by Sections Overall Operations - The chemical industry experienced a slight revenue increase with a profit growth rate surpassing revenue growth [18] - The gross profit margin for the industry was 16.8%, a year-on-year increase of 0.2 percentage points [18] - The report notes a continued downturn in the domestic real estate market and a slow recovery in consumption [2][18] Key Sub-Industries - **Fluorochemical**: Revenue reached 32.53 billion yuan in Q1-Q3 2025, with a year-on-year increase of 19.7% and net profit up 155.6% [9][41] - **Phosphate Chemical**: Revenue was 82.38 billion yuan, down 4.0% year-on-year, but net profit increased by 8.0% to 7.55 billion yuan [49][50] - **Potash Fertilizer**: Revenue grew by 13.1% to 20.77 billion yuan, with net profit rising 57.6% to 9.44 billion yuan [9] - **Pesticides**: Revenue reached 124.65 billion yuan, up 5.6%, with net profit increasing by 131.2% to 6.38 billion yuan [9] - **Soda Ash**: Revenue fell by 15.7% to 30.16 billion yuan, with net profit down 71.5% to 0.99 billion yuan [9] - **Polyurethane**: Revenue decreased by 1.9% to 163.35 billion yuan, with net profit down 16.5% to 9.51 billion yuan [9] - **Titanium Dioxide**: Revenue was 32.92 billion yuan, down 4.2%, with net profit down 46.3% to 1.74 billion yuan [9] - **Polyester Filament**: Revenue decreased by 5.0% to 118.94 billion yuan, but net profit increased by 38.0% to 2.42 billion yuan [9] - **Additives**: Revenue grew by 3.8% to 89.06 billion yuan, with net profit up 30.0% to 12.35 billion yuan [9] - **Civil Explosives**: Revenue increased by 16.6% to 48.83 billion yuan, with net profit up 8.2% to 3.60 billion yuan [9] - **Tires**: Revenue grew by 10.7% to 119.98 billion yuan, but net profit decreased by 17.3% to 9.89 billion yuan [9] - **Electronic Chemicals**: Revenue reached 52.97 billion yuan, up 13.1%, with net profit increasing by 22.4% to 6.05 billion yuan [9] Investment Recommendations - The report suggests actively positioning in the chemical sector, highlighting cyclical recovery and potential growth in various sub-industries [10][39]

Core Viewpoint - The price of VC additives has been declining significantly, reaching a low of 44,000 yuan per ton in the first half of 2025, leading to severe losses for manufacturers and prompting smaller companies to halt production. Larger companies, supported by strong financial backing and economies of scale, maintain higher operating rates despite long-term losses. The industry recognizes that maintaining stable prices is essential for sustainable development in the context of widespread losses and government advocacy against excessive competition [1][2]. Supply and Demand Analysis - In September, VC demand increased by 6% month-on-month, while the supply growth was less than the demand increase, resulting in a price uptick for VC. Major manufacturers such as Gengyuan, Huasheng, Huayi, and Fuxiang Pharmaceutical have a strong willingness to raise prices, contributing to the price stability of VC [1][2]. - The nominal production capacity in the market is 9,825 tons per month, with effective capacity at 7,500 tons per month. In September, the market supply was 5,800 tons, and demand was 5,880 tons, indicating a delicate balance between supply and demand. Manufacturers are rationally controlling their operating rates to maintain this balance [4]. - It is expected that both supply and demand will increase in October, keeping VC prices stable. However, a slight decrease in market demand is anticipated in December, which may lead to a minor price drop due to supply and demand dynamics. Overall, the VC market has sufficient capacity, and there is no current supply shortage due to insufficient production capacity [5].