Chemical Industry Capital Expenditure Sees Seven Consecutive Quarters of Negative Growth: Has the Supply-Demand Balance Improvement Been Established?

Based on the latest industry data and research reports, the chemical industry has seen seven consecutive quarters of negative capital expenditure,

[1][2].

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According to research data from SDIC Securities and CICC,

, with a year-on-year decrease of 18.3% in H1 2025, and the decline continues to expand[1][3]:

Time Period	YoY Growth Rate of Capital Expenditure	Marginal Change
2023Q4	-5.2%	Turned Negative for the First Time
2024Q1	-8.5%	↓
2024Q2	-12.3%	↓
2024Q3	-15.6%	↓
2024Q4	-17.8%	↓
2025H1	-18.3%	Slowed Down

: SDIC Securities uses two indicators, “Construction in Progress/Fixed Assets” and “Capital Expenditure/Operating Revenue”, to depict the position of the chemical industry’s capacity cycle. In H1 2025, the total construction in progress of listed companies in the basic chemical segment reached RMB 350.4 billion, a year-on-year decrease of 10%, indicating that the industry’s capital expenditure and capacity expansion cycle is coming to an end[1][2].

: Affected by the surging energy costs caused by the Russia-Ukraine conflict, European chemical enterprises are facing severe cost pressures. According to CEFIC data, the capacity utilization rate of the EU chemical industry has dropped to 74.6% in Q3 2025, far below the long-term average of 81%[1]. From 2023 to October 2024, Europe has shut down a total of approximately 11 million tons of ethylene capacity, accounting for nearly 10% of Europe’s total capacity[1][3].

: Institutions predict that by 2027, the proportion of South Korean chemical capacity eliminated may reach 18%-25% of total capacity[3].

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• China Chemical Product Price Index (CCPI)
  : As of December 31, 2025, the index stood at 3,930 points, down 39% from the 2021 peak, at the 23rd percentile of the past five years, indicating that the industry has entered a historical low range[1]
• Chemical Industry PPI
  : Data for June 2025 shows that the PPI of the petroleum, coal and other fuel processing chemical manufacturing industry decreased by 13.50% year-on-year, while that of the chemical raw material and chemical product manufacturing industry decreased by 6.10% year-on-year[4]

In the first three quarters of 2025, the basic chemical segment achieved a net profit attributable to parent companies of RMB 112.7 billion,

, indicating that the segment has initially stabilized[1][2].

Sub-Sector	Supply-Demand Status	Capacity Growth Rate	Price Trend	Concentration
Refrigerants	Tight Supply	-15%	Rising	High
Phosphate Chemicals	Tight Supply	-5%	Rising	High
Silicones	Improving	-10%	Rising	Medium
Polyester Filament/PTA	Improving	-8%	Stabilized	Medium-High
Pesticides	Improving	-6%	Stabilized	Medium-High
Soda Ash	Overcapacity	+5%	Low	Low
PVC	Overcapacity	-3%	Fluctuating	Medium

: As a pioneer of “anti-involution”, the refrigerant industry officially entered a quota system in 2024. In 2024, the industry’s average dynamic PE and PB ratios reached 44.23x and 3.59x respectively, significantly higher than the current levels of 28.10x PE and 2.05x PB for the basic chemical segment[5].

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On July 17, 2025, five ministries including the Ministry of Industry and Information Technology jointly issued the “Notice on Conducting a Survey and Evaluation of Old Plants in the Petrochemical and Chemical Industry”, which was interpreted by the market as an important signal of “anti-involution” in the industry[3][4]. According to Tianfeng Futures statistics, in industries such as caustic soda, short fibers, and pure benzene, the proportion of capacity that has been in operation for more than 20 years reaches 38.9%, 29.7%, and 17% respectively[3].

Some sub-sectors have voluntarily coordinated production cuts through industry self-discipline actions:

• PET Bottle Chips, Polyester Filament
  : The industry has voluntarily coordinated a production cut of approximately 20%[4]
• Spandex, Silicones, Caprolactam
  : Industry self-discipline mechanisms continue to advance[1]

According to the “Action Plan for Green and Low-Carbon Development of the Manufacturing Industry (2025-2027)”, the petrochemical industry, as one of the four key focused industries, will tap into green and low-carbon development potential from four aspects: raw materials, energy use, processes, and products, to promote “green expansion and efficiency improvement” of traditional industries[4].

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• Real Estate Chain
  : The newly started construction area of real estate continues to decline, suppressing the demand for chemical products related to the real estate industry chain such as PVC, soda ash, and titanium dioxide[4]
• Fuel Vehicles
  : Demand for traditional fuel vehicles is sluggish, and the driving force for chemical products has weakened[3]

:

• New Energy Materials
  : Demand for EVA films, POE particles, lithium battery materials, etc. continues to grow[3][4]
• Electronic Chemicals
  : Domestic substitution of photoresists, electronic specialty gases, wet electronic chemicals, etc. is accelerating[4]
• AI and Semiconductor Materials
  : Demand is strong driven by technological self-reliance and strategic security[1]
• Humanoid Robots
  : Demand for embodied intelligent materials such as PEEK, electronic skin, and tendon cord materials is growing[1]
• Solid-State Batteries
  : 2027 is a key window for industrialization, and demand for materials such as sulfide electrolytes and ultra-high nickel cathodes is expected[1]

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1. Sustained Negative Capital Expenditure
   : Seven consecutive quarters of negative growth, continuous decline in the scale of construction in progress, and significant slowdown in new capacity expansion[1][2]
2. Global Capacity Restructuring
   : High-cost capacity in Europe is accelerating exit, South Korean capacity faces clearance, and the export competitiveness of Chinese chemical products is enhanced[1][3]
3. Policy-Guided Capacity Reduction
   : The policy of surveying and evaluating old plants catalyzes the exit of outdated capacity, and industry self-discipline production cuts continue to advance[3][4]
4. Stabilization and Recovery of Profits
   : The net profit in the first three quarters increased by 7.5% year-on-year, indicating that the industry has initially emerged from the worst period[1]
5. Some Sub-Sectors Take the Lead in Reversal
   : The supply-demand balance of sub-sectors such as refrigerants, phosphate chemicals, and silicones has significantly improved, and prices continue to rise[1][5]

1. Prices Remain at Low Levels
   : The CCPI is at the 23rd percentile of the past five years, and overall prices have not yet reversed significantly[1]
2. Traditional Demand Remains Weak
   : Demand in traditional fields such as real estate and fuel vehicles has not shown obvious improvement[4]
3. Overcapacity Persists in Some Sub-Sectors
   : The supply-demand contradiction in industries such as soda ash and PVC is still prominent, with insufficient operating rates[4]
4. Overseas Policy Risks
   : External disturbances such as tariff policies and trade frictions[2]

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[1]:

• Wanhua Chemical, Hualu Hengsheng, Baofeng Energy, Satellite Chemical (Coal Chemical/Light Hydrocarbon Chemical)
• Hengli Petrochemical, Rongsheng Petrochemical, Hengyi Petrochemical, Oriental Shenghong (Refining and Chemical Integration)
• Yangnong Chemical (Pesticides), Longbai Group (Titanium Dioxide)
• Boyuan Chemical (Soda Ash), Juhua Co., Ltd. (Refrigerants)

[1][5]:

• Polyester Filament + PTA: Xin Fengming, Tongkun Co., Ltd., Sanfangxiang
• Spandex: Huafeng Chemical, Xinxiang Chemical Fiber
• Silicones: Xinan Co., Ltd., Dongyue Silicon Materials, Hesheng Silicon Industry
• Phosphate Chemicals: Yuntu Holding, Xingfa Group

[1]:

• Soda Ash: Boyuan Chemical
• PVC: Zhongtai Chemical, Xinjiang Tianye, Junzheng Group, Chlor-Alkali Chemical
• Titanium Dioxide: Longbai Group
• Pesticides: Yangnong Chemical, Runfeng Co., Ltd.

[1]:

• Green Energy: UCO, Bio-jet Fuel, Green Hydrogen, Ammonia and Alcohol
• Embodied Intelligent Materials: PEEK, Electronic Skin
• AI and Semiconductor Materials: Electronic Resins, Cooling Fluids
• Commercial Aerospace: Carbon Fiber Composites, Advanced Ceramics
• Solid-State Battery Materials: Sulfide Electrolytes, Silicon-Based Anodes

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1. Geopolitical Risks
   : Oil price fluctuations and changes in tariff policies may disturb the market[2]
2. Overseas Macro Recession Risks
   : Global economic downturn may suppress demand for chemical products[2]
3. Impact of Domestic Macro Policies
   : There are uncertainties in the progress of real estate recovery and the intensity of fiscal policies[2]
4. Capacity Clearance Falls Short of Expectations
   : The progress of capacity deleveraging in some overcapacity sub-sectors may be slower than expected[4]

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The chemical industry has seen seven consecutive quarters of negative capital expenditure,

, and the trend of supply-demand balance improvement has initially been established. 2026 is expected to be a turning point for the cycle reversal, but a full recovery still requires observation of the recovery of traditional demand and the progress of overcapacity clearance.

(PE 28.1x, PB 2.05x). Comparing with the refrigerant industry that took the lead in reversal (PE 44.23x), the chemical sector is expected to see investment opportunities with dual rises in performance and valuation driven by “anti-involution” policies.

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[1] SDIC Securities: “2026 Chemical Industry Investment Outlook: The Start of the Cycle, Breaking Through Involution” (January 6, 2026)

[2] BOC International Securities: “Chemical Industry Weekly Report” (January 6, 2026)

[3] 21st Century Business Herald: “How to View This Cycle of Chemical Stocks?” (November 26, 2025)

[4] Lianhe Credit Rating: “Summary and Outlook of Credit Risks in the Chemical Industry in H1 2025”

[5] Kaiyuan Securities: “‘Anti-Involution’ as a Shield, Demand as a Spear, the Chemical Industry is Expected to Enter a New Prosperity Cycle” (November 18, 2025)