Core Viewpoint - Sinopec has initiated the construction of an upgraded integrated refining and petrochemical project in Xinjiang, which is noted as the world's largest refiner by capacity [1] Group 1 - The project is located in the oil- and gas-rich Xinjiang region [1]

Group 1 - The core viewpoint of the report is that the target prices for China Petroleum (601857) and Sinopec (600028) have been lowered due to challenging market conditions in the downstream oil sector [1] - The target price for China Petroleum has been adjusted from HKD 4.6 to HKD 4.5, while Sinopec's target price has been reduced from RMB 6.5 to RMB 6.3 [1] - Despite the target price adjustments, the firm maintains an "outperform" rating for Sinopec's H-shares and A-shares, indicating a preference order among the "three oil giants" [1] Group 2 - Sinopec has issued a profit warning for the first half of 2025, indicating weaker profitability in the second quarter of 2025, which reflects ongoing challenges in the domestic oil downstream sector [1] - The market appears to overestimate the potential benefits for Sinopec and other Chinese refining companies from China's anti-involution policies, according to the report [1] - The firm has revised its earnings forecasts for Sinopec downwards by 4% to 5% for the fiscal years 2025 to 2027, in light of the anticipated weak performance in the second quarter of 2025 [1]

Group 1 - The core viewpoint of the report indicates that Citibank has lowered the target price for China Petroleum & Chemical Corporation (Sinopec) from HKD 4.6 to HKD 4.5, and for Sinopec's A-shares from RMB 6.5 to RMB 6.3 [1] - Citibank maintains an "outperform" rating for both Sinopec's H-shares and A-shares, but highlights a preference order for the "Big Three" oil companies, ranking China Petroleum (00857) and CNOOC (00883) higher than Sinopec [1] - The report notes that Sinopec issued a profit warning for the first half of 2025, indicating weak profitability in Q2 2025, reflecting ongoing challenges in the domestic oil downstream (refining and chemicals) industry [1] Group 2 - The market seems to expect that Sinopec and other Chinese refining companies will benefit from China's anti-involution policies, but Citibank believes the upside potential may be overestimated [1] - The financial forecasts for Sinopec for the fiscal years 2025 to 2027 have been revised down by 4% to 5% to account for the weak performance expected in Q2 2025 [1]

里昂发表报告指，中石化发布2025年上半年盈警，显示2025年第二季盈利能力较弱，反映内地石油下游 (炼油与化工)行业经营环境仍具挑战性。市场似乎预期中石化及其他中国炼油企业将受益于中国反内卷 政策，但该行认为其上行空间可能被高估。 里昂将中石化2025年至2027年财年每股盈利预测下调4%至5%，以反映2025年第二季疲弱的业绩表现； H股目标价从4.6港元下调至4.5港元，A股目标价相应从6.5元下调至6.3元，维持"跑赢大市"评级。里昂 对"三桶油"的偏好顺序为：中石油、中海油，最后为中石化。 ...

1. Report Industry Investment Rating No relevant content provided. 2. Core Views of the Report - **Price**: This week, FEI M1 closed at $529/ton (+$2.72), with a premium of -$21.75/ton. The spot price remained under pressure. CP closed at $524/ton (+$2), with a premium of -$25/ton. MB M1 closed at $366/ton (-$3). The domestic PG2509 closed at 3,923 yuan/ton (+124 yuan), and the 09 basis was 375 (+82). The price difference between CP and FEI M1 further narrowed to -$6.82/ton [1]. - **Domestic Supply**: As of Thursday this week, the operating rate of major refineries was 81.55% (+0.34%). Qilu Petrochemical started operations, and Daxie Petrochemical increased its load. The estimated refinery profit was 976.96 yuan/ton, due to the decrease in crude oil costs. The operating rate of independent refineries was 48.20% (+0.04%), with Haike Ruilin increasing its load and Dongming Petrochemical undergoing maintenance. The utilization rate excluding large - scale refineries was 44.36% (-0.54%). The domestic LPG sales volume was 52.65 tons (+0.16 tons). Haike Ruilin and Hualian Petrochemical restarted this period. Zhongmei Mengda plans to resume production in early August, and Qicheng Petrochemical has a maintenance plan. The commercial volume of ether - after C4 was 17.74 tons (+0.24 tons), which was seasonally high. Longzhong's arrival data showed that 80.98 tons arrived this week (+32 tons), and the 4 - week average arrival volume remained high [1]. - **Domestic Demand**: In terms of chemical demand this period, the PDH operating rate decreased slightly due to new maintenance, the alkylation operating rate changed little, and the MTBE operating rate decreased slightly due to new maintenance. For civil gas, it was still in the off - season of consumption, and the overall demand was weak [2]. - **Domestic Inventory**: The factory inventory was 18.08 tons (-0.35 tons). This week, the factory inventory decreased slightly for the first time recently, but the overall factory inventory was still high. Longzhong showed that the arrival volume this week increased compared with last week, and the 4 - week average was high. The port inventory was 313.44 tons (+9.36 tons), and the inventory fluctuated at a high level [3]. - **Overseas Situation**: In the United States this week, C3 production remained at a high level, demand improved from a low level, and the 4 - week average increased significantly. It was still in the inventory accumulation cycle, but the inventory accumulation slowed down in recent weeks. Kpler showed that the US LPG exports in June were 5,969 KT (+300 KT), of which only 458 KT (+129 KT) were sent to China, while the volume sent to Japan increased to 1,332 KT (+223 KT). Middle - East LPG exports in June were 3,698 KT (-515 KT), of which 1,281 KT (-518 KT) were exported to China and 1,662 KT (+232 KT) to India [6]. - **Overall View**: This period, crude oil was strongly influenced by geopolitical issues and showed a strong upward trend. On Friday, affected by the US non - farm payrolls data, international oil prices dropped significantly. At the same time, the domestic policy sentiment also weakened, and the futures market declined sharply. For LPG, the prices of both domestic and international markets fluctuated weakly compared with crude oil, and the price ratio decreased. The CP propane price in August decreased by $55 to $520/ton compared with July. Despite high exports, the international market remained under pressure. The domestic supply side remained loose, the combustion demand was weak, and the chemical demand changed little this period. From the supply side, the operating rate of major refineries was stable this week, and the commercial volume increased slightly due to the resumption of production of some enterprises. In terms of imports, the arrival volume rebounded this week, and the arrival volumes in recent weeks were generally high, and the port inventory remained at a high level. From the demand side, the overall PDH operating rate increased significantly due to the resumption of production of some devices this week. Although it decreased slightly due to the shutdown of Bohua, there are still some start - up plans in August, which will support the demand for LPG to a certain extent. In addition, the MTBE exports still provided short - term support, and the alkylation oil changed little. Overall, the LPG market remained in a loose situation [7]. 3. Summary by Relevant Catalogs 3.1 Weekly Core Data - **Supply**: The operating rate of major refineries was 81.55% (previous week: 81.21%, +0.34%); the operating rate of independent refineries was 48.2% (previous week: 48.16%, +0.04%); the domestic LPG commercial sales volume was 52.65 tons (previous week: 52.49 tons, +0.16 tons); the arrival volume (Kpler) was 1,017.55 tons (previous week: 640.95 tons, +376.6 tons); the arrival volume (LZ) was 81 tons (previous week: 49 tons, +32 tons) [8]. - **Demand**: The PDH operating rate was 72.63% (previous week: 73.13%, -0.5%); the MTBE operating rate was 66.18% (previous week: 67.85%, -1.67%); the alkylation oil operating rate was 46.56% (previous week: 46.36%, +0.20%); the sales - to - production ratio in East China was 103% (previous week: 99%, +4%); the sales - to - production ratio in South China was 100% (previous week: 93%, +7%) [8]. - **Inventory**: The factory inventory was 18.08 tons (previous week: 18.43 tons, -0.35 tons); the port inventory was 313.44 tons (previous week: 304.08 tons, +9.36 tons) [8]. - **US Situation**: C3 production was 2,822 (previous week: 2,845, -23); C3 demand was 1,089 (previous week: 438, +651); C3 inventory was 83,477 (previous week: 82,849, +628); the shipping volume (Kpler) was 1,265.32 tons (previous week: 1,440.41 tons, -175.09 tons) [8]. - **Middle - East Situation**: The shipping volume (Kpler) was 690.89 tons (previous week: 977.79 tons, -286.9 tons) [8]. - **Price and Valuation**: Brent was $69.52/barrel (previous week: $68.39/barrel, +$1.13); FEI M1 was $529.82/ton (previous week: $527.10/ton, +$2.72); CP M1 was $524/ton (previous week: $522/ton, +$2); MB M1 was $0.70/ton (previous week: $0.71/ton, -$0.01); NWE C3 M1 was $455.6/ton (previous week: $454/ton, +$1.6); the price difference between FEI and CP M1 was $5.82 (previous week: $5.10, +$0.72); the price difference between CP and MB M1 was $157.49 (previous week: $152.45, +$5.04); the main LPG futures contract was 3,965 yuan/ton (previous week: 4,047 yuan/ton, -82 yuan); the price of the cheapest LPG deliverable was 4,340 yuan/ton (unchanged) [8]. 3.2 Price and Profit Data - **Price Data**: It includes the prices of various crude oils, LPG, and related products, as well as their price differences, month - to - month spreads, and price - to - price ratios. For example, Brent was $71.78/barrel (previous day: $72.75/barrel, -$0.97, previous week: $69.36/barrel, +$2.42); FEI C3 M1 was $526.88/ton (previous day: $530.96/ton, -$4.08, previous week: $530.18/ton, -$3.31) [11]. - **Profit Data**: It includes the盘面 profit and spot profit of various processes, such as the LPG import盘面 profit (FEI: -654.50 yuan/ton, previous day: -602.12 yuan/ton, -52.38 yuan, previous week: -627.55 yuan/ton, -26.95 yuan; CP: -259.40 yuan/ton, previous day: -169.23 yuan/ton, -90.17 yuan, previous week: -237.03 yuan/ton, -22.37 yuan), and the Asian naphtha cracking profit (-41.5404 dollars/ton, previous day: -39.51 dollars/ton, +1.07 dollars, previous week: -39.51 dollars/ton, -2.03 dollars) [11]. 3.3 LPG Domestic Supply and Demand - **Domestic Weekly Supply and Demand Data**: The operating rate of major refineries was 81.55% (previous week: 81.21%, +0.34%); the operating rate of independent refineries was 48.2% (previous week: 48.16%, +0.04%); the LPG commercial volume was 52.65 tons (previous week: 52.49 tons, +0.16 tons); the PDH operating rate was 73.58% (previous week: 75.30%, -1.72%); the MTBE operating rate was 66.18% (previous week: 67.85%, -1.67%); the alkylation oil operating rate was 46.56% (previous week: 46.36%, +0.1985%) [76]. - **Refinery Operating Rate**: The operating rate of major refineries showed a seasonal high, and the operating rate of Shandong independent refineries also changed slightly [77][79]. - **LPG Arrival Volume**: The weekly arrival volume of Chinese LPG showed a seasonal pattern, and the arrival volume increased this week [80][81]. - **Domestic Commercial Volume**: The commercial volume of LPG in China showed a seasonal pattern, and the industrial and civil LPG commercial volumes also had corresponding changes [82][84]. - **C3 Chemical Demand - PDH**: The PDH operating rate rebounded, and some devices had maintenance and restart plans [89]. - **C4 Chemical Demand**: It includes the demand and operating rates of MTBE and alkylation oil. The MTBE operating rate decreased slightly, and the alkylation oil operating rate increased slightly [93][104]. - **Combustion Demand**: The sales - to - production ratios of LPG in East China and South China increased, while that in Shandong was relatively low [115][116]. - **LPG Factory Inventory**: The factory inventory decreased slightly this week, but the overall inventory was still high [117][118]. - **LPG Port Inventory**: The port inventory increased, and the inventory remained at a high level [125][126]. - **Imports and Exports (Kpler)**: The weekly total imports of Chinese LPG showed a seasonal pattern, and the imports from the United States and the Middle East also changed [132][137]. 3.4 LPG US Supply and Demand - **Weekly Supply and Demand Situation**: The US refinery operating rate showed a seasonal pattern. The C3 production decreased slightly, the demand increased, and the inventory increased [144][147]. - **Monthly Supply and Demand Situation**: The monthly production, demand, and inventory of US propane also showed seasonal patterns [159][160]. - **Imports and Exports (Kpler)**: The weekly total exports of US LPG showed a seasonal pattern, and the exports to different regions also changed [161][170]. - **Panama Canal Situation**: The water level of the Panama Canal's Gatun Lake and the number of ships waiting to pass through the locks showed seasonal patterns [171][173]. 3.5 LPG South Korea and Japan Supply and Demand - **South Korea Supply and Demand**: The production, demand, inventory, imports, and exports of South Korea's LPG and propane all showed seasonal patterns [174][185]. - **Japan Supply and Demand**: The production, demand, inventory, imports, and exports of Japan's LPG also showed seasonal patterns [190][194]. 3.6 LPG Middle - East Supply and Demand - **By Exporting Country (Kpler)**: The total exports of Middle - East LPG, the exports of different countries (such as the UAE, Iran, Qatar, Saudi Arabia, and Kuwait), and the exports to China all showed seasonal patterns [199][205]. - **By Destination**: The exports of Middle - East LPG to China, India, and Southeast Asia showed seasonal patterns [206][207]. - **By Export Terminal**: The exports of LPG from different export terminals (such as Ruwais in the UAE, Ras Laffan in Qatar, Mina Al - Ahmadi in Kuwait, and Ras Tanura in Saudi Arabia) showed seasonal patterns [208][211]. 3.7 LPG India Supply and Demand - **Supply and Demand Situation**: The production, demand, imports, and exports of Indian LPG showed seasonal patterns [216][219].

Core Insights - The Chinese refining and chemical industry faces structural contradictions, characterized by an excess of refining capacity but insufficient high-end chemical production, necessitating increased technological innovation to overcome product bottlenecks and reshape the industry landscape [1] Industry Overview - China is the world's largest producer and consumer of petrochemical products, accounting for one-third of global consumption. In 2024, China's refining capacity is projected to reach 930 million tons, with ethylene capacity at 54.55 million tons per year, leading in various products such as propylene and synthetic resins [1] - The self-sufficiency rate of basic chemicals has significantly improved, yet there is an intensifying competition in low-end products and a high dependency on imports for high-end products [1] Capacity and Demand Dynamics - The production capacity growth for major chemical products like ethylene and propylene is expected to outpace demand, with an annual growth rate of 13.5% from 2025 to 2027, while the consumption growth rate is only projected at 4% to 5%. By 2025, propylene capacity utilization is anticipated to drop to 66% [1] - Despite a total domestic production of 700,000 tons of polyoxymethylene by the end of 2024, imports will still account for 330,000 tons, indicating technological bottlenecks hindering domestic production [1] Strategic Recommendations - Experts suggest that the government should establish a refining capacity red line and conduct scientific top-level design for integrated refining and chemical bases, while strictly controlling the pace of "oil-to-chemical" transitions and accelerating disruptive technological innovations [2] - There is a need for differentiated reform and development strategies based on the positioning and advantages of enterprises and products [2]