Core Viewpoint - Asahi Kasei, Mitsui Chemicals, and Mitsubishi Chemical are collaborating to decarbonise and optimise ethylene production in western Japan, supported by the Ministry of Economy, Trade and Industry's HtA Support Programme [1][5]. Group 1: Collaboration and Transition - The companies will establish a joint operating entity to manage ethylene production, leading to the closure of the AMEC facility at the Mizushima Plant by fiscal year 2030 [2]. - Operations will be consolidated at the Osaka Petrochemical Industries facility in Takaishi, Osaka [2]. - Equipment modifications will be made at OPC's Senboku Factory and other sites, with plans to dismantle AMEC's equipment and explore uses for the vacated site aligned with carbon neutrality [3]. Group 2: Investment and Technology - An investment of Y21.2 billion ($139 million) is allocated for the transition, including a subsidy application of up to Y10.4 billion [4]. - The investment will focus on transitioning ethylene production facilities and establishing an initial production facility using Asahi Kasei's Revolefin technology [4][6]. Group 3: Industry Impact - Ethylene production is crucial for the petrochemical industry, serving as a foundation for various products [5]. - The cooperative strategy aims to reduce greenhouse gas emissions by sharing technology and implementing carbon-neutral measures [5][7]. - The HtA Support Programme is expected to facilitate a transition towards competitive decarbonised basic chemicals, supporting market expansion and sustainable business models [7].

Core Insights - BASF SE has commenced operations at its steam cracker in the new Verbund complex in Zhanjiang, China, representing a significant investment in the region and one of the largest projects in its global network for Asia-Pacific [1][3] Group 1: Facility and Production - The steam cracker has an annual ethylene capacity of approximately 1 million metric tons and is the first globally to operate its main compressors entirely on renewable energy, showcasing BASF's commitment to sustainable chemical production [2][7] - This facility will supply multiple downstream units and enhance BASF's local value chain to cater to the rapidly growing chemical market in China [3][7] Group 2: Market Position and Performance - Zhanjiang is positioned to be BASF's third largest Verbund site globally, following Ludwigshafen and Antwerp, further solidifying its presence in the chemical industry [3] - BASF's shares have increased by 0.5% over the past six months, contrasting with a 13% decline in the industry [4]

Core Viewpoint - The article discusses the impact of Venezuela's oil exports on China's oil import structure, highlighting a significant decline in the share of Venezuelan oil in China's total imports due to U.S. sanctions, with projections indicating it will remain below 1% in the coming years [1][4]. Group 1: Import Data and Trends - Before 2019, Venezuelan oil accounted for over 5% of China's total oil imports, but from 2020 to 2023, imports ceased due to U.S. sanctions [1]. - In the first eleven months of 2024 and 2025, China imported 1.4983 million tons and 0.3417 million tons of oil from Venezuela, representing only 0.27% and 0.07% of total imports, respectively [1]. Group 2: Characteristics of Venezuelan Oil - Venezuelan oil is primarily heavy, high-sulfur crude, which requires specific refining equipment due to its high density and viscosity [2]. - This type of oil is a crucial low-cost raw material for many domestic refineries and integrated companies capable of deep processing, such as CNOOC and Guangdong Petrochemical [3]. Group 3: Implications for the Industry - The small percentage of Venezuelan oil imports is vital for maintaining the stability of certain low-cost refining routes and specific chemical product chains in China [4]. - The U.S. blockade on Venezuelan oil exports has heightened the risk of trade disruptions, but a full-blown crisis in China's oil supply is unlikely due to several factors, including a currently ample global oil supply and diversified import sources [4]. Group 4: Mid-term Challenges for the Chemical Industry - The reliance on Venezuelan heavy oil will force local refineries and downstream chemical enterprises to seek alternative raw materials, which are typically more expensive, thereby increasing production costs and squeezing profits [5]. - Refining facilities may need to undergo technical modifications or adjust production plans to accommodate new oil types, leading to additional investment and operational costs [5]. - Market volatility for related chemical products, such as propylene and asphalt, may increase, necessitating enhanced supply chain and price risk management for midstream and downstream enterprises [5].

Core Insights - Petrobras and Braskem have signed long-term feedstock supply contracts valued at $17.8 billion, marking a significant milestone in the Brazilian petrochemical industry [1][2][18] Group 1: Overview of the Agreements - The agreements consist of two major contracts: one for petrochemical naphtha worth $11.3 billion and another for natural gas liquids (NGLs) worth $5.6 billion, set to commence in January 2026 [3][4] - The naphtha supply deal will provide 4.116 million tons in 2026, increasing to 4.316 million tons by 2030, ensuring a stable supply for Braskem's operations [5][6] Group 2: Strategic Shift and Expansion - Braskem is transitioning from naphtha to more competitive NGLs like ethane, aiming to enhance Brazil's position in global petrochemical production [2][11] - The $5.6 billion contract for ethane, propane, and hydrogen is crucial for expanding Braskem's Duque de Caxias facilities, expected to run for 11 years starting in 2026 [6][7] Group 3: Long-term Supply Commitments - From 2026 to 2028, Petrobras will supply 580,000 tons of ethylene equivalent annually, increasing to 725,000 tons per year starting in 2029, supporting Braskem's expansion plans [10][11] - Additional propylene supply agreements valued at approximately $940 million will further support Braskem's diverse production lines, ensuring access to necessary feedstocks [14][15] Group 4: Strategic Influence and Future Outlook - Petrobras is increasing its influence over Braskem as Novonor plans to divest its stake, indicating a trend of state-controlled entities shaping Brazil's petrochemical sector [12][13] - The collaboration between Petrobras and Braskem is expected to unlock nearly $800 million in investments, driving growth and modernization in the Brazilian petrochemical industry [7][18]

Core Viewpoint - ExxonMobil plans to permanently shut down one of its two steam crackers at its Singapore refining and petrochemical complex due to global overcapacity in the petrochemical industry, which has negatively impacted profitability [1][3]. Company Overview - ExxonMobil operates a 592,000-barrel-per-day refinery in Jurong, Singapore, which is integrated with the Singapore Chemical Plant (SCP) that has an ethylene production capacity of 1.9 million tonnes per year [2]. Industry Context - The petrochemical industry is facing challenges with razor-thin margins and losses, primarily due to overcapacity, particularly from China, which has led to a global glut affecting profitability [3][4]. - South Korea's government has urged its petrochemical sector to restructure and reduce excess capacity, with the ten largest domestic companies agreeing to cut naphtha-cracking capacity by up to 25% [5]. Future Plans - The closure of the steam cracker is expected to be completed by June 2026, and ExxonMobil plans to reduce its workforce by 10-15% by 2027 as part of a global restructuring effort [6].

1. Report Industry Investment Rating - Unilateral: Neutral; the supply - demand gap narrows, but the cost - side support is insufficient and the upward drive is limited. It is expected to mainly fluctuate weakly at the bottom [3] 2. Core View of the Report - On the supply side, the restart of Zhenhai Refining and Chemical's cracking unit and the maintenance of Sinochem Quanzhou and Shanghai Petrochemical's units led to a slight overall increase in propylene start - up. The maintenance of the PDH unit of Juzhengyuan in South China had limited impact on supply. The restart of Hebei Haiwei's PDH unit was postponed, and the external sales volume of propylene products may continue to increase. On the demand side, the start - up of some downstream industries rebounded, but the profit of downstream industries was under pressure due to the rising propylene price. The spread between PP and propylene narrowed, and the downstream was resistant to high - priced raw materials. The start - up rate of the main downstream PP decreased month - on - month. The price of propylene oxide dropped significantly, and the procurement enthusiasm decreased under cost pressure, weakening the expected support for propylene demand. The international oil price rebounded slightly in the short - term, but there was still a long - term pressure of oversupply. The supply of propane from the Middle East to China was tight, and the price of external propane strengthened slightly recently. The report suggests paying attention to cost - side disturbances [2] 3. Summary According to Relevant Catalogs 3.1 Market News and Important Data - **Propylene**: The closing price of the propylene main contract was 5,798 yuan/ton (-22), the spot price in East China was 5,995 yuan/ton (-5), the spot price in North China was 6,050 yuan/ton (-25), the basis in East China was 197 yuan/ton (+17), the basis in North China was 179 yuan/ton (-43), the start - up rate was 74% (+1%), the difference between China's propylene CFR and Japan's naphtha CFR was 192 US dollars/ton (+18), the difference between propylene CFR and 1.2 propane CFR was 67 US dollars/ton (+11), the import profit was - 354 yuan/ton (-86), and the in - plant inventory was 48,970 tons (+3,930) [1] - **Propylene downstream**: The start - up rate of PP powder was 42% (-4.20%), and the production profit was - 310 yuan/ton (+55); the start - up rate of propylene oxide was 75% (+0%), and the production profit was 136 yuan/ton (+91); the start - up rate of n - butanol was 82% (+1%), and the production profit was - 263 yuan/ton (+66); the start - up rate of octanol was 81% (+4%), and the production profit was 72 yuan/ton (+118); the start - up rate of acrylic acid was 77% (+4%), and the production profit was 444 yuan/ton (+4); the start - up rate of acrylonitrile was 81% (+1%), and the production profit was - 443 yuan/ton (+21); the start - up rate of phenol - acetone was 81% (+2%), and the production profit was - 415 yuan/ton (+0) [1] 3.2 Market Analysis - **Supply side**: The restart of Zhenhai Refining and Chemical's cracking unit and the maintenance of Sinochem Quanzhou and Shanghai Petrochemical's units led to a slight overall increase in propylene start - up. The maintenance of the PDH unit of Juzhengyuan in South China had limited impact on supply. The restart of Hebei Haiwei's PDH unit was postponed, and attention should be paid to its restart expectation in the later stage, with the external sales volume of propylene products possibly continuing to increase [2] - **Demand side**: The start - up of some downstream industries rebounded, with significant increases in the start - up rates of acrylic acid and octanol. However, considering the rising propylene price, the downstream profit was under pressure, and the spread between PP and propylene narrowed. The downstream was resistant to high - priced raw materials, and some main powder units reduced their loads or stopped production. The price of propylene oxide dropped significantly, and the procurement enthusiasm decreased under cost pressure, weakening the expected support for propylene demand [2] - **Cost side**: The international oil price rebounded slightly, but there was still a long - term pressure of oversupply. The supply of propane from the Middle East to China was tight, and the price of external propane strengthened slightly recently. Attention should be paid to cost - side disturbances [2] 3.3 Strategy - **Unilateral**: Neutral; the supply - demand gap narrows, but the cost - side support is insufficient and the upward drive is limited. It is expected to mainly fluctuate weakly at the bottom [3] - **Inter - period**: None [3] - **Inter - variety**: None [3]

Summary of the Conference Call on China's Chemical Sector Industry Overview - The conference focused on the transformation of China's chemical sector under the anti-involution policy, aiming for a domestic supply-demand balance by the end of the decade with over 90% of production consumed within China [1][2][3]. Key Points and Arguments 1. **Transformation and Upgrades**: China's chemical sector is undergoing significant changes driven by the anti-involution policy and the upcoming 15th Five Year Plan, focusing on upgrading existing assets and phasing out obsolete equipment to prioritize higher-value products [2][3]. 2. **Capacity Reductions**: Approximately 3 million tons per year (tpy) of capacity is being eliminated, particularly older naphtha cracking units, with impacts expected on supply-demand balances around 2028-2029 [3][4]. 3. **Producer Dynamics**: New ethylene and propylene capacities are concentrated among state-owned enterprises (SOEs) and large private players, focusing on higher-margin derivatives. Shutdowns for private producers occur when margin losses exceed approximately 1,000 RMB/t for 2-3 years [4][11]. 4. **Global Implications**: The global petrochemical market may face risks as mid-cycle conditions could shift lower due to efficiency gains at the higher end of the cost curve. Current policies are favorable for companies rated as Buy, such as ALB and LAC, while EMN and MEOH could benefit from more aggressive reforms [5][33]. 5. **Ethylene Capacity Growth**: China's ethylene capacity is projected to reach 98 million tpy by 2029, with a compound annual growth rate (CAGR) of 12% from 2024 and 9.8% from 2020. Domestic demand for ethylene is expected to grow by 64% by 2028 [7][8]. 6. **Propylene Market Dynamics**: China holds approximately 38% of the global propylene market, with domestic sufficiency at around 96%. The competition is more fragmented compared to ethylene, with the top five producers accounting for only about 15% of the market [11][12]. 7. **Policy Approach**: The government is adopting a more cautious policy approach towards new ethylene projects, emphasizing stability and gradual rationalization rather than abrupt cuts [9][10]. 8. **Strategic Risks**: Ethane sourcing remains a strategic risk, with most ethane for ethylene production still imported from the U.S., raising tariff concerns [17]. Additional Important Insights - The anticipated wave of new capacity additions in ethylene is expected to peak in 2026, with significant additions in derivatives like polyethylene (PE) and monoethylene glycol (MEG) through 2029 [8][12]. - The restructuring of the propylene sector is driven by policy measures and market forces, focusing on technology upgrades and consolidation rather than new entrants [14][15]. - The crude oil to chemicals (CTC) projects remain uncertain, with potential delays but expected to yield significant olefins and aromatics if realized [16]. This summary encapsulates the critical insights from the conference call regarding the evolving landscape of China's chemical industry, highlighting both opportunities and risks for investors.

Core Viewpoint - Enterprise Products Partners is expected to have a better year ahead as new projects ramp up, despite facing some current headwinds in its business [1][10]. Business Performance - The company has experienced some challenges, including the expiration of attractive long-term contracts in its LPG business and normalization of high spreads in propylene and octane enhancement [2]. - In Q3, total gross operating profit decreased by 3% to $2.39 billion, while adjusted EBITDA fell by 1.5% to $2.41 billion [6]. - Distributable cash flow (DCF) declined by 7% to $1.83 billion, and adjusted free cash flow was reported at $96 million [6]. Financial Health - Despite the weak quarter, the company's distribution remains well covered with a coverage ratio of 1.5x based on DCF, and it ended Q3 with a leverage ratio of 3.3x [7]. - The quarterly distribution was $0.545 per unit, reflecting a year-over-year increase of 3.8% [7]. - The company has increased its stock buyback authorization from $2 billion to $5 billion, indicating a focus on capital allocation flexibility [3]. Growth Prospects - Enterprise has several large projects set to come online soon, including the Frac 14 NGL fractionator and two returning PDH plants [8]. - The company has $5.1 billion in projects under construction and has ramped up capital expenditure to $4.5 billion this year, with plans to reduce capex to between $2.2 billion and $2.5 billion in 2026 [9]. Valuation - The stock trades at a forward EV/EBITDA multiple of 9.5x based on 2026 estimates, which is below its historical valuation multiple, presenting an attractive entry point for investors [11].

Summary of Global Chemicals Conference Call Industry Overview - The conference call focused on the **Global Chemicals** industry, particularly the impact of China's anti-involution measures and global supply-demand dynamics in the chemical sector [1][3][10]. Key Themes and Insights 1. **Global Supply Growth Projections**: - The compound annual growth rate (CAGR) for global supply from 2024 to 2028 is expected to be lower than from 2020 to 2024, with estimates of **3.1%** in a bear case (no Chinese closures) and **2.0%** in a bull case (all capacities over 20 years old closed) [1][21][52]. - The previous CAGR from 2020 to 2024 was **3.9%**, indicating a more disciplined supply growth moving forward [21][52]. 2. **Impact of China's Anti-Involution Measures**: - China's government is focusing on closing older capacities (over 20 years) to address oversupply issues in the refining and chemical markets [10][12]. - The anticipated recovery in the chemical sector is expected to be more meaningful from **mid-2026** onwards, contingent on the execution of these measures [13][23]. 3. **Investor Interest Reignited**: - The potential for anti-involution measures in China, combined with overseas chemical players closing plants due to high production costs, has rekindled investor interest in the chemical sector [3][10]. 4. **Product-Specific Capacity Growth**: - Capacity CAGRs for major products typically range from **1.0% to 6.4%** (without Chinese closures) and **0.8% to 4.0%** (with closures) [8][54]. - Specific products like ethylene and polyethylene are expected to see significant capacity additions in the upcoming years [65]. 5. **Profitability Trends**: - Major A-share chemical stocks have rallied approximately **10%** since the announcement of anti-involution measures on **July 18, 2025** [17]. - Despite a decline in profitability for major A-share companies in the first half of 2025, a seasonal recovery is expected in the second half [19][20]. Stock Recommendations - **China**: - Upgrade for **Wanhua** to Overweight (OW) with a price target of **Rmb80** due to expected benefits from volume growth and product spread expansion [25]. - Upgrade for **Rongsheng** to Equal-weight (EW) with a price target of **Rmb10.6**, anticipating quarterly earnings improvement [26]. - **Europe**: - Top pick is **Akzo**, with additional recommendations for **Syensqo**, **BASF**, and **AKE** [27][28]. - **India and Southeast Asia**: - Favorable outlook for **PTTGC** and **Petronas Chemicals** due to potential upside from China's anti-involution efforts [31]. Risks and Challenges - Potential risks include ineffective supply-side reforms, worsening demand due to trade tensions, and unfavorable inventory cycles [33]. Conclusion - The global chemicals industry is poised for a more disciplined growth phase, influenced by China's anti-involution measures and external market dynamics. The focus on closing older capacities and the potential for improved profitability in the coming years present both opportunities and risks for investors in this sector [1][10][20].

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **Global Chemicals Cracker** industry, focusing on the dynamics of chemical demand and supply, particularly in relation to tariffs and manufacturing activity [1][2]. Core Insights and Arguments - **Chemical Demand Risks**: There is a potential downside to manufacturing as more supply is being shut down. The reversal of pre-emptive inventory builds due to tariffs could pose unexpected risks to chemical demand [1][2]. - **Supply Rationalization**: Despite announcements of supply rationalization, it appears insufficient to rebalance markets. The average spread in August remained flat, with a notable increase in EU TDI prices offset by declines in Asia [1][2]. - **Capacity Reductions**: Ten Korean companies are set to reduce naphtha cracking capacity by approximately 2.7-3.7 million tons, representing 18-25% of total capacity. Korea accounts for 6% of global ethylene/propylene capacity [2]. - **China's Supply Dynamics**: China's Ministry of Industry and Information Technology (MIIT) may phase out smaller refining and chemical facilities, but older crackers owned by Sinopec and PetroChina are expected to see upgrades, leading to net supply additions rather than closures [2]. - **Global Economic Indicators**: Citi's global economic surprise index increased in July but has since fallen in August, primarily due to China. Industrial production in China expanded by 6% YoY in July, but austerity measures are beginning to impact demand [2]. Margin and Performance Analysis - **Margin Trends**: The average spread was stable month-over-month in August, with lower spreads in Asia offset by TDI in Europe. BASF's average weighted spread decreased by approximately 1% month-over-month, indicating a potential EBITDA of around €7.3 billion, which is about 3% below consensus [3][10]. - **Sector Performance**: The chemical sector's weak performance in Q2 suggests that chemical demand has not significantly benefited from pre-buying. The outlook for September is critical to assess demand trends for the remainder of 2025 [2][3]. Company-Specific Developments - **BASF**: The company reported a marginal decline in its weighted average spread for chemicals and materials, translating to a negative net pricing impact of approximately €0.1 billion for the second half of the year [10]. - **Arkema**: European acrylic acid margins were flat month-over-month, but margins in China dropped by about 22% due to lower prices. Arkema is viewed positively for its long-term earnings resilience [10]. - **Clariant**: The company is favored for its defensive portfolio, which is less reliant on commodity pricing and more focused on higher quality end markets [10]. - **Dow Chemical**: Dow announced a 50% cut to its dividend due to a prolonged soft commodity cycle and missed Q2 earnings expectations [15]. - **LG Chem**: The company is focusing on high-value-added products amid industry oversupply, with a realistic outlook on cathode shipment guidance [14]. Additional Important Insights - **Market Sentiment**: The overall sentiment in the chemical industry remains cautious, with expectations of continued low margin conditions for the rest of the year [11][15]. - **Investment Recommendations**: Within diversified chemicals, companies such as AKE, CLN, EVK in Europe, and LG Chem, PChem, and Kumho in Asia are highlighted as favorable investment opportunities [4][10]. This summary encapsulates the key points discussed in the conference call, providing insights into the current state and future outlook of the global chemicals cracker industry.