Recently, there has been a rotation of hotspots in the commodity market. Following precious metals and non-ferrous metals, the chemical sector has begun to attract capital attention. For example, on January 22, chemical futures rose almost across the board, with synthetic rubber, ethylene glycol, and styrene all increasing by over 4%. There are clear signs of capital inflow, with nearly 1.7 billion yuan flowing into just PTA and styrene. This raises a core question: Is the collective strength of the chemical sector the beginning of a trend reversal, or a short-term emotional release?
<h2>0 1 Why has market attention shifted to chemicals?</h2>
The initiation of a market trend usually requires a clear narrative logic. The current core focus of the market is a story about &#34;cyclical reversal.&#34;
The first half of this story is a long industry downturn. Over the past four years, the chemical industry has faced dual pressures: previous capital expenditure expansion has led to serious overcapacity, while demand in downstream sectors such as real estate has slowed. Under intense competition, product prices have continued to be under pressure, with some varieties operating long-term near the cost line, resulting in overall weak industry profitability.
However, there have been signs of change in the second half of the story. Starting in the second half of 2025, the &#34;anti-involution&#34; policy direction has extended to the chemical sector. The policy focus is on addressing low-price competition and promoting the exit of backward production capacity. For example, there are plans to evaluate and shut down or transform outdated facilities that have been in operation for over 20 years, as well as stricter approval controls on new production capacity.
These policy signals are significant as they may indicate that the phase of disorderly expansion on the supply side is nearing its end. Correspondingly, industry data shows that companies' willingness to expand is weakening. In the first three quarters of 2025, capital expenditure by petrochemical listed companies decreased by 10.1% year-on-year, and the scale of ongoing projects is shrinking. When the industry is in a long-term low-price environment, expansion stops, and policies promote clearance, its potential for &#34;turning from extreme to positive&#34; naturally attracts capital's attention. This also explains why the chemical sector in the stock market and related ETFs have risen simultaneously, further boosting the heat in the commodity market.
<h2>0 2 Short-term &#34;catalysts&#34; strengthen the bullish narrative</h2>
Long-term logic provides direction, while short-term events often act as &#34;accelerators&#34; for market trends. Recently, several factors have significantly strengthened bullish sentiment.
First, there is the impact of extreme weather. North America has recently experienced a severe cold wave, causing natural gas prices to surge by over 60% in a short period. As an important raw material and energy source for chemicals, the spike in natural gas prices directly raises production costs. More importantly, extreme cold weather may directly impact production facilities. The U.S. Gulf Coast concentrates the vast majority of the country's ethylene capacity and many chemical plants, and low temperatures may lead to equipment failures, pipeline freezes, and logistics disruptions, raising market concerns about supply tightness. This weather-driven supply risk expectation is a classic pattern for pushing prices higher in the short term.
Secondly, geopolitical tensions provide cost support. Ongoing tensions in the Middle East and other regions support crude oil prices. As the cost cornerstone of the entire energy and chemical system, the firm price of crude oil raises the cost center of chemical products from the source. In particular, Iran, as an important source of imports for methanol, ethylene glycol, and other chemicals in China, has changes in its situation that are more likely to trigger concerns about supply chain stability, thereby boosting market sentiment
The combination of long-term narratives and short-term catalysts has effectively ignited the market's enthusiasm for buying.
<h2>0 3 The market shows structural differentiation, not a broad rise</h2>
A close observation reveals that the recent rise in the chemical sector is not widespread but exhibits clear structural characteristics. Strong-performing varieties typically have specific highlights in their supply and demand patterns.
Taking PTA and its upstream PX as an example, the core logic lies in &#34;capacity mismatch.&#34; By 2026, the PTA industry is expected to have no new capacity, and its raw material PX may only see a few new installations coming online in the second half of the year. However, downstream polyester capacity continues to grow. This creates a mismatch where upstream raw materials and midstream products face supply constraints, while downstream demand is still expanding, providing room for price increases.
The rise in synthetic rubber has a different logic, focusing more on &#34;cost-driven&#34; and &#34;supply contraction.&#34; Over 70% of the production cost of synthetic rubber comes from butadiene. Recently, butadiene has seen tight supply and firm prices due to domestic facility maintenance and increased exports, significantly raising the cost baseline for synthetic rubber. At the same time, synthetic rubber's own production declined in December last year. The resonance between rising costs and supply contraction has driven rapid price increases.
This reflects the selective nature of capital in the current environment. The market is not blindly buying the entire sector but is digging deep into those sub-varieties where supply-demand contradictions are most pronounced and fundamental logic is most solid. This resembles a &#34;structural valuation repair&#34; based on expectations of supply-side improvements.
<h2>0 4 Several issues worth noting</h2>
The market unfolds amid optimistic sentiment, but several issues still require attention.
First, the sustainability of cost support. The North American cold wave is a short-term weather event, and its impact will eventually fade. Once the weather returns to normal and natural gas prices fall, the resulting cost support will weaken. Crude oil prices also face a complex global supply-demand game, with uncertain upward potential. If cost support weakens subsequently, the foundation for rising chemical prices will be tested.
Second, the capacity of terminal demand to absorb. This is currently the biggest uncertainty. The downstream demand for chemical products involves many sectors, including construction, automotive, home appliances, and textiles. At present, apart from a few sectors like new energy that have structural highlights, overall demand has not shown widespread and strong recovery. If raw material price increases cannot be smoothly transmitted to end consumer products, it will ultimately squeeze the profits of midstream manufacturing, potentially triggering negative feedback effects. The previous pullback in PX and PTA prices was partly due to downstream polyester factories' limited acceptance of high-priced raw materials.
Third, the rhythm and effectiveness of policy implementation. The direction of &#34;anti-involution&#34; and eliminating backward production capacity is clear, but specific execution and effectiveness require time, and there may be repetitions or resistance in the process. Policies are more about building long-term bottom support and providing expected space rather than directly driving price increases.
Therefore, it may be premature to assert that the chemical sector has entered a &#34;full bull market.&#34; The subsequent evolution is more likely to follow a path of &#34;oscillating upward with differentiated rhythms.&#34;
0 5 Comprehensive Assessment: Structural Opportunities and Gradual Progress
In summary, the following points can be made regarding the current chemical sector:
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Long-term logic has shown positive changes. The capacity expansion cycle is nearing its end, coupled with policies promoting industry consolidation and clearance, forming the underlying logic for the sector's valuation recovery. The lowest phase of the industry cycle may be passing.
</li>
<li>
Short-term driven by events and capital. Extreme weather, geopolitical events, and other factors have provided catalytic themes, while the spillover of stock market sentiment has also brought in incremental capital, jointly contributing to the recent rapid rise.
</li>
<li>
The market shows significant differentiation. Sub-sectors with clear capacity pattern improvement logic and supply-demand mismatches (such as the PTA industrial chain and butadiene industrial chain) will perform more prominently.
</li>
<li>
Demand is the ultimate verification metric. Whether the market can deepen from a &#34;rebound&#34; to a &#34;reversal,&#34; and even form a larger trend, ultimately depends on the strength of the recovery in actual downstream demand. The resumption progress and inventory replenishment intensity of downstream industries after the Spring Festival is a key time window to focus on.
</li>
</ol>
For market participants, compared to chasing every fluctuation, in-depth research into a few sub-industrial chains with clear supply-demand patterns may be more effective. At this stage, &#34;buying on dips&#34; may be more operational than &#34;buying on highs,&#34; as market sentiment and event-driven volatility remain high. Additionally, there needs to be a full expectation of the complexity and repetitiveness of the market.
The chemical industry is vast, and its cyclical operation often spans years. The current trend resembles the early stages of a marathon; we have seen acceleration after the start, but there is still a long way to the finish line, inevitably accompanied by structural differentiation and rhythm differences along the way.
Source: Hedging Research
Risk Warning and Disclaimer
The market carries risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk.

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Recently, the chemical sector has attracted capital attention, with chemical futures almost all rising, and synthetic rubber, ethylene glycol, and styrene increasing by over 4%. The market is focused on the "cyclical reversal" story, with policy guidance addressing low-price competition, promoting the exit of backward production capacity, and weakening corporate expansion intentions. Short-term factors such as extreme weather leading to a surge in natural gas prices further strengthen bullish sentiment

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