On February 24, the first trading day of the Year of the Horse, the A-share chemical sector continued to rise during the trading session, with strong performances in sub-sectors such as phosphorus chemicals and pesticides. Several stocks hit the daily limit, including Liuguo Chemical, Yuntu Co., Yuntianhua, and Hubei Yihua in the afternoon, while Meibang Co., Chitianhua, and Jinzhengda had previously reached their limits. Stocks like Sierte, Xinyangfeng, and Yangnong Chemical also saw significant gains.
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The latest report from Guotou Securities points out that the chemical industry has reached a turning point after experiencing a four-year downturn. Multiple indicators show that the industry has basically bottomed out, with 2026 expected to be a turning point in the cycle.
In terms of prices, the China Chemical Product Price Index (CCPI) reported 3930 points on December 31, 2025, down 39% from the peak in 2021, and at the 23rd percentile over the past five years, it has entered a historically low range. In terms of profitability, the basic chemical sector achieved a net profit attributable to shareholders of 112.7 billion yuan in the first three quarters of 2025, a year-on-year increase of 7.5%, indicating that the sector is beginning to stabilize.
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More critically, industry capital expenditure has decreased by 18.3% year-on-year, marking seven consecutive quarters of negative growth since the fourth quarter of 2023. Measured by the indicators of construction in progress/fixed assets and capital expenditure/revenue, the phase of supply expansion has come to an end, and the capacity cycle is reaching an inflection point.
Based on this, the report predicts that the market will shift from a valuation repair phase of &#34;weak reality, strong expectations&#34; after the holiday to a verification period of whether price increases can be sustained. Short-term focus should be on the dye industry chain and TMP (trimethylolpropane), as the approaching peak season of &#34;golden March and silver April&#34; provides a layout window for low-inventory chemical fiber varieties and elastic phosphorus chemical varieties.
<h2>Dyes: First round of price increases verified, intermediate products may rise beyond expectations</h2>
The dye sector is currently one of the sub-industries where the logic of chemical price increases has been most fully realized. According to Baichuan Yingfu data, as of February 22, the price of disperse dyes was reported at 21,000 yuan/ton, up 23.53% since the beginning of the year; the price of reactive dyes was reported at 23,000 yuan/ton, up 4.55% since the beginning of the year.
Guotou Securities pointed out that the core driver of this round of dye price increases comes from the irreversible concentration of intermediate product patterns. The price of reducing agents for disperse dye intermediates has risen to 70,000 yuan/ton, an increase of 45,000 yuan/ton from previous lows; the intermediate H-acid for reactive dyes has also shown potential for price increases due to supply contraction driven by uncontrollable events in 2025.
The team compares dye intermediates to lemon aldehyde in the VA industry chain, believing that both share common characteristics such as complex synthesis processes, highly concentrated capacity under an oligopoly pattern, and high cost proportions of intermediates in downstream costs, while dyes have a very low cost proportion in finished garment costs, thus making the price increase path relatively smooth. Currently, prices for other intermediates such as m-phenylenediamine, m-aminophenol, hexachlorobenzene, and hexabromobenzene have not yet started to rise, and leading enterprises are expected to continuously consolidate downstream dye price increase expectations through alternating price increases of intermediates, with price upward elasticity potentially exceeding expectations.
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<h2>TMP: Supply-Demand Mismatch and Cost Resonance, Prosperity May Exceed Expectations</h2>
TMP (Trimethylolpropane) has become one of the most outstanding varieties in the chemical sector. According to Baichuan Yingfu data, as of February 22, the TMP price was reported at 12,000 yuan/ton, with a cumulative increase of 43.71% this year.
Guotou Securities analysis believes that the current TMP market is driven by a dual resonance of supply-demand mismatch and cost push. On the supply side, sudden production cuts in the Ningxia region combined with maintenance in Hebei have led to a short-term effective supply gap; in the long term, Wanhua Chemical's 50,000 tons/year TMP capacity will be transformed into a neopentyl glycol facility, and overseas capacity continues to weaken due to high energy and labor costs, indicating that the supply contraction trend may continue.
On the demand side, TMP, as a core raw material for UV-curable coatings, new energy materials, and pharmaceutical intermediates, is experiencing sustained demand release against the backdrop of recovering PVC product exports and upgrades in the new energy industry. On the cost side, the price of raw material n-butyraldehyde has increased by 7.69% this year, while the decline in by-product calcium formate prices has further compressed production profits, leading manufacturers to have a strong willingness to maintain prices.
The report believes that TMP is currently in a dual resonance period supported by supply-demand mismatch and cost, and the industry's prosperity is expected to evolve from a short-term price pulse to a medium- to long-term upward profit center.
<h2>Chemical Fiber: The &#34;Golden March and Silver April&#34; Peak Season Approaches, Low Inventory Varieties Expected to Show Elasticity</h2>
The report points out that the &#34;Golden March and Silver April&#34; is the traditional demand peak season for the chemical fiber industry, with downstream resumption of work after the holiday and peak season stocking creating price elasticity for low inventory varieties.
In terms of polyester filament, coordinated production cuts are being implemented orderly, with low inventory welcoming the Q2 peak season. Mainstream factories will implement a new round of production cuts starting in late December 2025, estimating a 15% reduction from three major filament factories, which may bring industry load down to 71%-72% during the Spring Festival, the lowest level in nearly three years (excluding pandemic years). As of February 12, the inventory of mainstream varieties POY was only 11.7 days, at a historically low level.
For viscose staple fiber, high operating rates combined with low inventory provide upward price elasticity. The industry operating rate reached 88.45% as of February 13, at a historically high level, while factory inventory dropped to 94,500 tons, a nearly one-year low. The industry is expected to have no new capacity added in 2026, and the rising cotton prices are expected to drive substitution demand, while the introduction of vortex spinning equipment may further boost demand, maintaining a tight balance in the supply-demand pattern.
In terms of polyester bottle flakes, industry load is further declining, and profitability is expected to recover rapidly. Under the &#34;anti-involution&#34; narrative, supply-side contraction continues, with the industry operating rate dropping from 76.05% at the beginning of the year to 70.89%. The current average profit is about 14.02 yuan/ton, an increase of 115.15 yuan/ton compared to the same period last month, achieving a turnaround from loss to profit. According to Baichuan Yingfu, as of February 14, 2025, about 5.22 million tons of capacity is in or will be in a state of suspension or production conversion, accounting for approximately 24.1% of total capacity.
<h2>Phosphate Chemicals: Strategic Attributes Elevated, New Energy Demand Strengthens Optimistic Supply-Demand Expectations</h2>
The phosphate chemical sector has recently received additional catalysts from geopolitical factors. According to World Agrochemical Network, on February 18, Trump signed an executive order invoking the Defense Production Act, designating elemental phosphorus and glyphosate herbicides as critical defense materials, thereby clearly elevating the strategic status of phosphorus within the U.S. policy framework
Guotou Securities believes that this move means that the value reassessment of phosphate rock will increase a layer of geopolitical attributes, and as the country with the most complete global phosphate chemical industry chain, China's leading companies are expected to further enhance their international competitiveness.
In terms of monoammonium phosphate (MAP), the high-speed expansion cycle of total industry capacity from 2.29 million tons in 2021 to 4.84 million tons has come to an end, with only three new units totaling 380,000 tons expected to be added before 2028. On the demand side, the capacity of ammonium iron phosphate is expected to increase by 750,000 tons and 730,000 tons in 2026 and 2027 respectively, making MAP likely to evolve into a key strategic raw material with strong resource attributes and high prosperity sustainability.
Regarding phosphoric acid, according to Argus data, there will be a supply-demand gap of tens of thousands of tons in the international phosphoric acid supply-demand balance sheet until the first half of 2026, and the phosphoric acid market may maintain strength in the first half of the year. According to SMM New Energy, global power battery production is expected to be about 1,421 GWh in 2025, a year-on-year increase of 36%; according to ICC Xinluo Information, global energy storage battery shipments are expected to reach 640 GWh in 2025, a year-on-year increase of 82.9%, and are expected to reach 1,090 GWh in 2026, effectively driving the release of phosphoric acid demand.
In terms of yellow phosphorus, new capacity is strictly constrained under policy control, and the recent high prices of sulfur (up 113.92% year-on-year to 4,150 yuan/ton as of February 22) may activate short-term substitution demand for thermal phosphoric acid, thereby driving the growth of yellow phosphorus demand.
<h2>Rebound or reversal, demand is the ultimate verification</h2>
From a macro perspective, the underlying logic of the current chemical market has shown positive changes. Industry price levels have fallen back to historical low ranges, profitability has stabilized and rebounded, and capital expenditures have seen negative growth for seven consecutive quarters, indicating that the supply expansion phase has basically come to an end.
At the same time, European chemical production capacity is accelerating contraction, and Chinese companies are seizing global market share with scale effects and cost advantages. Among the 86 major chemical products under key monitoring, 60% of products are expected to have export volumes at near six-year highs in 2025.
However, the substantial recovery on the demand side remains the biggest uncertainty. The downstream of chemical products covers a wide range of fields including construction, automobiles, home appliances, and textiles. Currently, except for a few tracks like new energy, overall demand has not shown a widespread strong recovery. If raw material price increases cannot be smoothly transmitted to the end, profits in the midstream manufacturing sector will be under pressure. The progress of downstream resumption of work and replenishment efforts after the Spring Festival will become a key observation window to determine whether the market can deepen from a &#34;rebound&#34; to a &#34;reversal.&#34;

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On the first trading day of the Year of the Horse, the chemical sector surged, with multiple stocks in sub-sectors such as phosphorus chemicals and pesticides hitting the daily limit. Guotou Securities pointed out that after four years of a downward cycle, the industry is now at the threshold of a reversal, with capital expenditure experiencing negative growth for seven consecutive quarters, establishing a supply turning point. After the holiday, the market will shift from valuation repair to a price verification phase, with the supply and demand patterns of sub-varieties such as dyes, TMP, chemical fibers, and phosphorus chemicals optimizing, and prosperity is expected to continue

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The chemical sector's "good start" in the Year of the Horse marks the end of valuation repair, and the price increase realization period has arrived!