Key Takeaways The chemical industry faced weak demand in construction, autos and electronics amid inflation and tariffs.Soft demand in China and Europe, plus trade tariffs, continued to pressure chemical volumes in 2025.Chemical makers are cutting costs and improving efficiency to protect margins heading into 2026.The chemical industry has grappled with a demand slowdown in certain major markets, including consumer durables and building & construction, cautious spending by customers and pockets of inventory ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Chemicals and Oil & Gas - **Key Focus**: The impact of anti-involution policies on the chemicals sector and oil price trends leading up to the OPEC+ meeting Chemicals Sector Insights - **Anti-involution Policies**: The chemicals sector is expected to benefit from anti-involution policies aimed at promoting healthy development. This includes: - Tightening project approvals - Identifying obsolete capacity and creating an elimination list - Promoting industry self-discipline to prevent price dumping - Including chemical products in the carbon trading market [2][2][2] - **Performance Metrics**: CSI 300 chemical stocks outperformed the CSI 300 index by 4% last week, indicating positive market sentiment [2][2][2]. - **Capacity Issues**: The capacity-to-demand ratio for 36 petrochemical commodities reached 130% in 2024, suggesting significant overcapacity in the sector [2][2][2]. - **Subsectors to Watch**: Focus on subsectors with overcapacity and poor profitability, such as: - Fertilizers (phosphate fertilizers/urea) - Chlor-alkali (soda ash/PVC) - Oil refining/olefins - Pesticides and silicones [2][2][2]. Oil & Gas Sector Insights - **Oil Prices**: Brent futures averaged US$69/bbl, remaining stable week-over-week, supported by low inventories and geopolitical risks [3][3][3]. - **Inventory Changes**: US commercial crude inventories fell by 3.2 million barrels, exceeding consensus estimates of a 1.6 million barrel decline [3][3][3]. - **OPEC+ Meeting**: The upcoming OPEC+ meeting on August 3 is crucial, with expectations that production increases will be maintained [3][3][3]. Price Movements in Chemicals - **Price Changes**: - TDI average selling price (ASP) rose 18% week-over-week due to force majeure events [4][4][4]. - Silicone DMC ASP increased by 11% week-over-week due to supply contraction [4][4][4]. - Potassium chloride ASP fell by 3% as supply stabilization policies took effect [4][4][4]. Stock Recommendations - **Oil & Gas Stocks**: - Preferred stocks include PetroChina-A/H for its strong natural gas business and Jereh for overseas market expansion [5][5][5]. - **Chemicals Stocks**: - Focus on companies in sectors with excess capacity and potential benefits from anti-involution, such as: - Hualu-Hengsheng (fertilizers) - Hengli Petrochemical (refining) - Wanhua (TDI) and Yangnong (pesticides) for price hike potential [5][5][5]. Risks Identified - **Oil & Gas Sector Risks**: - Fluctuations in crude oil prices - Disappointing reserve and productivity enhancements - Declining prices of major petrochemical products [9][9][9]. - **Chemicals Sector Risks**: - Earnings fluctuations due to oil price volatility - Demand risks from global economic uncertainties - Rapid new capacity coming online [10][10][10]. - **New Materials Sector Risks**: - Technological changes and policy risks - Difficulty in tracking revenue and sales growth [11][11][11]. Conclusion - The chemicals and oil & gas sectors are currently navigating significant changes due to government policies and market dynamics. Investors are advised to focus on specific subsectors and companies that are well-positioned to benefit from these trends while being mindful of the associated risks.