Societe Generale Securities: The inflection point of the chemical cycle is about to arrive, and emerging demand helps upgrade

The Zhitong Finance App learned that Societe Generale Securities released a research report saying that in 2026, the chemical industry will usher in dual opportunities for cyclical recovery and industrial upgrading. Chemicals have been operating in the bottom range for three years. The growth rate of projects under construction in the industry continues to decline, and the investment of new production capacity is nearing its end. Looking ahead to 2026, the steady domestic growth policy is expected to gain strength in the year the “15th Five-Year Plan” begins. The Federal Reserve enters a cycle of interest rate cuts, and traditional demand for chemicals is expected to recover moderately; fueled by the “anti-domestic volume” wave, the inflection point of the cycle is expected to accelerate, and core chemical assets with global competitive advantages are expected to usher in profit and valuation repairs.

Societe Generale Securities's main views are as follows:

cycle

“Anti-internal volume” optimizes the supply order, and some subsectors that promote self-regularity/profit bottom-line industries are expected to recover, focusing on silicone, PTA, polyester filament, caprolactam, spandex, soda ash, PVC, glyphosate, and urea. Currently, in the chemical industry, many sub-industries under pressure on profits, such as silicone, PTA, caprolactam, etc., are gradually starting industry self-regulation to recover profits. The performance of related enterprises is expected to improve with the implementation of relevant price control and production reduction measures. Other sub-sectors that fluctuate at the bottom of the product price and spread cycle are also expected to see profit improvements driven by the industry's potential self-discipline and the restoration of its own supply and demand.

pesticides

The storage cycle has come to an end, and the boom is expected to bottom up, and the ability to create will become a competitive factor for China's pesticide industry in the future. Continued inventory removal brought global pesticide channel stocks closer to a reasonable level in 2025. Some varieties took the lead in raising prices, and signs of cycle restoration began to appear. In the next two years, we will move to the stage of removing production capacity. Strong pesticide companies with cost advantages and market channels will further increase the concentration of the industry and the pricing power of leading companies. At the same time, domestic enterprises continue to make significant progress in R&D, production and marketing capabilities to create pesticides, and leading companies are expected to achieve high added value upgrades along the smile curve.

Go out to sea

Barriers to tire trade have gone from crisis to opportunity, and tire companies with a global layout are expected to benefit from price increases brought about by the European Union. In 2025, international trade barriers in the tire industry showed a trend of comprehensive escalation. The United States expanded the scope of tariffs on a global scale, and the European Commission announced the launch of a double anti-investigation into new passenger car and light truck tires originating in China. The EU anti-double anti-investigation is expected to be implemented in early 2026. If the double anti-tax rate is high and domestic exports of semi-steel tires are blocked, the demand gap in the EU market will be filled by other regions overseas. The phased supply and demand mismatch is expected to bring opportunities for price increases. Leading tire companies with overseas production bases and actively expanding production are expected to enjoy the double dividends of volume increase and price increase.

Emerging industries

There is a long way to go to reduce carbon. The AI industry continues to prosper, and SAF, bio-based materials, CCUS, electronic resins, liquid cooling materials, and lithium battery materials are booming. Europe is ambitious to reduce carbon. Starting the first year of sustainable aviation fuel (SAF) in 2025, the EU will set standards and mandatory targets for bio-based plastics in 2027. Carbon capture, utilization and storage (CCUS) is also an important part of its “European Green Agreement” core strategy, and it is expected that relevant policies will also be introduced in the context of China's “dual carbon” strategy. Demand for AI computing power remains strong, and electronic resins and liquid cooling materials are important upgrade directions; AIDC storage will become an important growth pole for lithium battery materials.

Risk warning: risk of large fluctuations in crude oil prices, risk of environmental protection policy implementation falling short of expectations, risk of trade frictions continuing to worsen, risk of large fluctuations in chemical product prices, risk of disorderly expansion of production capacity.