According to the Zhitong Finance APP, Guosen Securities released a research report stating that since late September 2024, domestic monetary policy has been intensively released, and a new round of stimulus policies is expected to address issues such as weak consumption and insufficient demand. The effects of a package of incremental policies and the existing stock policies are gradually becoming apparent. It is anticipated that against the backdrop of falling raw material costs and gradually recovering downstream demand, the supply-demand pattern in the chemical industry is expected to improve, leading to a rebound in prosperity. For 2025, it is recommended to focus on investment directions in chemical products with improved medium to long-term supply-demand patterns and scarce resource attributes, particularly in the fields of petroleum, natural gas, phosphorus chemical, potassium fertilizer, oil and fat chemicals, and SAF.

The main viewpoints of Guosen Securities are as follows:

Review of the Petrochemical Industry in 2024

In 2024, affected by weak market demand and oversupply, the overall chemical PPI showed a year-on-year decline. Among the major sub-industries in the first half of 2024, the upstream industries (oil and gas extraction, energy processing) had a relatively high year-on-year increase in PPI, reflecting the tight supply in the global energy market.

In the first half of 2024, the chemical industry was generally in a replenishment phase. From January to September 2024, over 60% of listed chemical companies achieved year-on-year revenue growth. However, due to weak demand and high energy and raw material costs, less than half of the listed chemical companies achieved positive year-on-year growth in net profit attributable to shareholders. In terms of fixed investment, the year-on-year growth rate of fixed asset investment in major chemical sub-industries in 2024 was relatively stable, and the pace of capital expenditure expansion slowed compared to the peak in 2021.

Outlook for the Petrochemical Industry in 2025 by Subsector:

Crude Oil Sector: With the global interest rate cut cycle beginning and the macro economy continuously recovering, oil demand is moderately rebounding. On the supply side, OPEC+ continues to maintain production cuts. Considering OPEC+'s high fiscal breakeven oil price and the high new well costs of U.S. shale oil, oil prices are expected to remain in the medium to high range. It is expected that the Brent oil price will center around $65-75 per barrel, and the WTI oil price will center around $60-70 per barrel. Key recommendations include China Petroleum (601857.SH) and China National Offshore Oil Corporation (600938.SH).

Natural Gas Sector: It is expected that natural gas consumption will reach approximately 450 billion cubic meters in 2025, with a future consumption peak expected to be around 600-700 billion cubic meters, representing an increase of over 50% from the current level. In the future, there is significant growth potential in urban gas, industrial, and gas power sectors. On the supply side, China's unconventional gas production continues to grow, becoming an important growth driver; imports are also showing a stable increase. The natural gas industry is still in a high-growth period in the medium to long term, with key recommendations including China Petroleum and China National Offshore Oil Corporation.

Potassium Fertilizer Sector: The overseas potassium fertilizer replenishment cycle has begun, coupled with the price demands of international potassium fertilizer oligopolies, leading to a rebound in global potassium fertilizer prices, with a mid-term price turning point emerging. There is a gap in China's potassium fertilizer demand, with imports mainly coming from Canada, Russia, and Belarus, and a rapid increase in imports from Laos in recent years. Currently, the international potassium fertilizer market is still dominated by a few companies in a monopolistic position Refrigerant Sector: Against the backdrop of tightening long-term quotas for refrigerants and a boost in air conditioning production, we are optimistic that the prosperity of R22 and R32 refrigerants will continue. The supply-demand pattern is expected to develop positively with strong certainty. Leading companies in the quotas for second and third-generation refrigerants are likely to maintain long-term high profitability. It is recommended to pay attention to leading fluorochemical companies with complete industrial chains, comprehensive infrastructure, and leading refrigerant quotas, with a focus on Juhua Co., Ltd. (600160.SH) and Sanmei Co., Ltd. (603379.SH).

Phosphate Chemical Sector: Considering the commissioning of new production capacity and the exit of outdated capacity, the increase in domestic phosphate rock supply is limited in the short to medium term. On the demand side, traditional demand remains stable, while demand in new downstream fields, represented by lithium iron phosphate, is growing rapidly, leading to an overall positive demand trend. In the next three years, the supply-demand pattern of phosphate rock in China is expected to remain in a tight balance. Key recommendations include Yuntianhua Co., Ltd. (600096.SH) and Xingfa Group (600141.SH), which have rich phosphate rock reserves.

Fat and Oil Chemical Sector: The main producing countries of palm oil are Indonesia and Malaysia. Due to natural weather, limited planting area, and aging trees, the supply side of palm oil is difficult to boost. Indonesia will implement B40 biodiesel starting in 2025, promoting an increase in palm oil consumption, leading to an upward cycle in palm oil prices. It is recommended to focus on Zanyu Technology (002637.SZ), which has cost advantages in fat and oil chemicals.

Sustainable Aviation Fuel (SAF) Sector: The European Union has clearly stated that 2% of aviation fuel must be SAF by 2025, with a gradual increase in the SAF proportion to 70% by 2050. Global SAF demand is expected to double to 2 million tons by 2025, and domestic large-scale commercial use of SAF will gradually be realized. In the medium to long term, global SAF demand will grow rapidly. Key recommendations include Zhuoyue New Energy (688196.SH), a leading domestic biodiesel company engaged in SAF.

Risk Warning: Fluctuations in raw material prices; fluctuations in product prices; downstream demand may be less than expected, etc