Core Viewpoint - The official launch of the Hainan Free Trade Port on December 18, 2025, presents new business opportunities for local small and medium enterprises and reduces various costs, but the limited downstream consumption capacity in Hainan means the impact on natural rubber prices is currently minimal. Continuous monitoring of subsequent policy developments is necessary [2][11]. Group 1: Background of Hainan Free Trade Port - The Hainan Free Trade Port officially started its customs closure on December 18, 2025, implementing a series of policies including import tax item catalog, tax policies for goods circulation, and customs supervision measures [2][11]. - Hainan is the second-largest natural rubber production area in China, with its rubber planting area accounting for approximately 47% of the national total by 2025, and its production fluctuating between 250,000 to 350,000 tons, representing 25% to 45% of the national output [2][11]. Group 2: Consumption Capacity in Hainan - The downstream consumption capacity for natural rubber in Hainan is limited, with no tire manufacturing companies and few product manufacturing enterprises. The annual consumption of natural latex in China is around 800,000 tons, with Hainan's consumption being less than 10% of the national total [4][13]. - Hainan's natural latex production capacity accounts for about 30% of the national latex silk capacity, while the region's annual import of natural latex has been around 1% of the national total over the past five years [4][13]. Group 3: Impact of Hainan Free Trade Port on Natural Rubber Market - The core of the Hainan Free Trade Port's customs closure involves "opening up the first line" and "controlling the second line," allowing free movement within the island. Imported natural rubber is subject to normal import duties, VAT, and consumption tax, but products processed with imported materials that achieve over 30% added value can enjoy duty exemptions when entering the mainland [6][15]. - The closure may influence the raw material preferences of downstream latex product companies. Current market prices show that imported natural latex from Thailand and Vietnam is priced between $1,330-$1,340 and $1,230-$1,260 per ton, respectively, while Hainan's local latex price is between 10,600-10,900 yuan per ton [7][16]. - If downstream product companies opt for imported latex due to lower costs, this could negatively impact the sales of Hainan's natural latex producers. However, reduced production costs may enhance the competitiveness of these products in the mainland market [7][16].

Investment Rating - The report maintains an "Overweight" rating for the basic chemical industry [1][10]. Core Insights - The basic chemical index experienced a decline of 1.46% over the past week, outperforming the CSI 300 index, which fell by 1.75%, resulting in a relative outperformance of 0.29 percentage points [14]. - Key sub-industries that performed well include synthetic resin (4.60%), food and feed additives (2.99%), adhesives and tapes (2.95%), carbon black (2.03%), and non-metallic materials III (0.69%) [15]. - The report highlights a significant price increase in several chemical products, with liquid chlorine rising by 28.57%, epoxy chloropropane by 9.81%, and TDI by 8.81% [22][23]. - Conversely, lithium carbonate (industrial grade) and lithium carbonate (battery grade) saw declines of 10.53% and 10.39%, respectively [22][23]. Market Trends - The basic chemical sector is currently benefiting from a favorable market environment, with the "anti-involution" policy being reiterated by the Central Political Bureau, aiming to optimize market competition and regulate disorderly competition among enterprises [6][7]. - The report notes that the air conditioning production data for August indicates a year-on-year decline of 2.8% in household air conditioning production, with domestic sales down by 11.9% [8][9]. Chemical Price Trends - The report provides a detailed analysis of chemical price movements, indicating that the top five products with the highest weekly price increases include liquid chlorine, epoxy chloropropane, soft foam polyether, TDI, and concentrated nitric acid [22][23]. - The report also highlights significant price drops in lithium carbonate and natural latex, indicating volatility in the chemical market [22][23]. Investment Recommendations - The report suggests focusing on several key sectors: 1. Refrigerant sector, with companies like Jinshi Resources and Juhua Co. recommended for their potential price increases [10]. 2. Chemical fiber sector, with recommendations for Huafeng Chemical and Xin Fengming [10]. 3. High-quality stocks such as Wanhua Chemical and Hualu Hengsheng are also highlighted [10]. 4. Tire sector recommendations include Sailun Tire and Linglong Tire [10]. 5. Agricultural chemicals sector with a focus on Yara International and Salt Lake Potash [10]. 6. Growth stocks like Bluestar Technology and Shengquan Group are also recommended [10].