Investment Rating - The report maintains an "Overweight" rating for the basic chemical industry [1] Core Views - The fire at Covestro's German plant has led to a rapid increase in TDI prices, which may also drive up MDI prices [1] - Covestro's TDI production capacity of 300,000 tons/year is significantly impacted, affecting 30% of TDI capacity in Europe [4] - Domestic TDI prices have risen to 14,913 RMB/ton, a 6.04% increase, with expectations for further price hikes in Q3 [4] - The report anticipates that TDI price increases will lead to a rise in MDI prices, which are currently at 15,200 RMB/ton, up 1.33% [4] Industry Trends - Covestro's supply disruptions and domestic maintenance activities are tightening TDI supply, leading to increased prices [4] - The report notes that overseas TDI capacity is shrinking, with significant closures in Germany and Japan, which may benefit Chinese exporters [4] - China's TDI exports reached 51,600 tons in May 2025, a year-on-year increase of 98.45%, indicating strong demand in Southeast Asia [4] - The report highlights key companies in the industry, including Wanhua Chemical, Cangzhou Dahua, and Hualu Hengsheng, with respective TDI capacities of 1,110,000 tons/year, 160,000 tons/year, and 300,000 tons/year planned for 2024 [4]

Core Points - China has eliminated approximately 628,000 tons of ozone-depleting substances (ODS), accounting for over half of the total elimination in developing countries [1][2] - The implementation of the "National Plan" aims to strengthen the management of ODS and hydrofluorocarbons (HFCs), promoting green and low-carbon development across various industries [1][2] Group 1: National Plan and Regulatory Framework - The "National Plan" outlines the control of nine substances, including chlorofluorocarbons, halons, and HFCs, with specific reduction targets set for 2025 and 2030 [2][3] - The plan mandates a 67.5% reduction in controlled uses of hydrochlorofluorocarbons (HCFCs) by 2025 and a 97.5% reduction by 2030 [3] - HFCs will see a 10% reduction in controlled uses by 2029 [3] Group 2: Industry Challenges and Opportunities - The fluorochemical industry is a significant part of China's emerging strategic industries, producing over 50% of global fluorochemical products [6] - The household appliance sector has adopted propane (R290) as an environmentally friendly alternative, with over 10 million R290 air conditioners produced by the end of 2024 [6] - The automotive industry is a major user of HFCs, with regulations set to ban high GWP refrigerants in new vehicle air conditioning systems starting July 1, 2029 [5][7] Group 3: Technological Development and Innovation - The refrigeration and air conditioning industry has seen substantial growth, with a total output value of 460 billion yuan in 2023, significantly larger than when the phase-out of CFCs began [10] - The foam industry faces challenges in finding suitable alternatives to HFCs, with various replacement technologies having different cost and safety implications [10][11] - The fire protection industry is also seeking new alternatives to HFC-based extinguishing agents, emphasizing the need for innovation and collaboration between academia and industry [11]