1 minute, limit-up! The entire sector is going crazy! Major news suddenly breaks from Saudi Arabia

It’s the Chemical sector’s turn today!

In the early hours of April 7, the Chemical sector surged across the board! As of the time of publication by a reporter from China Securities Journal, the Wind Chemical Industry Index rose by more than 3%, leading all A-shares. Among them, Dongyue Silicate Materials hit the daily limit after opening, within 1 minute; then Lingwei Technology hit the daily limit with a 20% gain; Xinan Shares, Youfu Shares, Hengyi Petrochemical, and other stocks also hit the daily limit; 13 stocks saw gains of more than 10%.

On the news front, according to Xinhua News Agency, Iran’s Fars News Agency on the early morning of the 7th cited unnamed sources as saying that an explosion occurred that day at the Jubail Industrial Zone in northeastern Saudi Arabia, involving U.S. capital, as a result of a wide-scale attack. On the 6th, the Israel Defense Forces issued a statement saying that on that day it carried out an airstrike on a large petrochemical integrated facility in the Asaluyeh area in southern Iran; the facility is Iran’s largest petrochemical integrated complex.

Institutional analysts believe that over the past 10 years, the global chemical industry has not achieved a significant improvement in large-scale capability; instead, it has continued to clear out capacity and supply. After 2022, Europe, as well as Japan, South Korea, and Southeast Asia after this oil crisis, could all be constrained by their fragile supply chains, facing an acceleration in the clearing of chemical supply. As a result, global effective chemical assets will highlight their scarcity. On the demand side, benefiting from the rapid rise of its population structure and resource prices, demand in Asia, Africa, and Latin America is growing quickly, which may bring about a supply-demand gap for industrial goods and thereby push industrial-goods inflation. Against this backdrop, the market will recognize the non-replicability of China’s chemical assets, and will apply a premium to China’s production capacity that has supply-chain resilience ensured.

The Chemical sector surged across the board

In the early hours of April 7, the Chemical sector drove a rally in the A-share market!

As of the time of publication by a reporter from China Securities Journal, the Wind chemical industry index rose by more than 3%. Lingwei Technology hit the daily limit with a 20% gain, Dongyue Silicate Materials hit the daily limit, Guangkang Biochemical rose by more than 13%, and stocks such as Jiangnan High Fibers also hit the daily limit. For heavyweight stocks, Wanhua Chemical rose by 4.39%, Baofeng Energy rose by more than 6%, and Hualu Hengsheng rose by more than 7%.

The conflict in the Middle East has become the biggest trigger for this market move. According to Xinhua News Agency, on the early morning of the 7th, Iran’s Fars News Agency cited unnamed sources as saying that an explosion occurred that day at the Jubail Industrial Zone in northeastern Saudi Arabia, involving U.S. capital, as a result of a wide-scale attack.

The report said that the Jubail Industrial Zone is one of the world’s important petrochemical production bases, with an annual output of about 60 million tons of petrochemical products, accounting for 6% to 8% of global total output. The zone brings together multiple large petrochemical companies and projects. Among them, Saudi Basic Industries Corporation is one of the main investors in the industrial zone. In addition, the Sadara project, in which U.S. Dow Chemical Company is involved, and projects jointly invested by Saudi Aramco and French energy company TotalEnergies are also located in the industrial zone.

In addition, according to Xinhua News Agency, on the 6th the Israel Defense Forces issued a statement saying that on that day it carried out an airstrike on a large petrochemical integrated facility in the Asaluyeh area in southern Iran; the facility is Iran’s largest petrochemical integrated complex.

The statement said that the Israel side has carried out strikes on two major petrochemical integrated complexes in Iran, dealing a serious blow that left more than 85% of Iran’s petrochemical export capacity damaged.

The statement said that key infrastructure used to produce explosives and ballistic missile propellants, among other materials, is located in facilities related to Asaluyeh; it is an important supply hub of raw materials for Iran’s missile industry. The Israel side will continue to increase strikes against the core infrastructure for weapon production in Iran, aiming to cause “broad and sustained damage” to its military manufacturing capabilities.

A brokerage analyst told a reporter from China Securities Journal that the impact of the war between the United States and Iran on the petrochemical industry is not limited to oil prices; the short-term supply shock caused by attacks on industrial parks is even more direct, and the market will give an even more direct response. In the medium to long term, petrochemical production capacity in the Middle East and Europe may continue to shrink due to the war.

Jin Yiteng, Chief Chemical Industry Analyst at Kaiyuan Securities, also said in a research report not long ago that, from a long-term perspective, crises accelerate the clearing of overseas capacity. China’s global share in chemical products and its profitability center are set to rise together. Since 2013, China’s chemical product sales revenue and China’s chemical industry capital expenditures have been consistently No. 1 globally and have maintained a stable growth trend. Between 2022 and 2025, Europe’s chemical industry cumulatively shut down 9% of its total production capacity. In the future, China’s chemical companies will further capture global market share by leveraging core advantages such as full-industry-chain supporting capabilities and cost control, continuing to enjoy high-profit growth dividends.

The sector enters an upward cycle

Notably, institutions’ optimism about chemicals has been sustained for some time.

Yang Hui, Assistant Director of the Research Institute of CITIC Securities and Chief Analyst for Petroleum, Chemical Engineering & Basic Chemical Industry, said that for 2026, the first main line in chemicals’ core development is an upward shift in the oil price core level. Based on the idea that crude oil has moved away from the marginal pricing paradigm of supply and demand and entered an OPEC-dominated, resource-nationalism pricing paradigm, this leads to the judgment that the oil price core level will rise—hence the view that oil and gas stocks, coal chemical industry, and natural gas chemical industry will perform well.

The second main line is a reversal in supply and demand. The chemical industry has gone through capacity digestion over the past three years. Last year, it entered a stage where capital expenditure for fixed assets turned negative. With demand supported steadily by overseas growth, the market expects to see a supply-demand reversal in the chemical industry this year. The war between the U.S. and Iran is expected to re-calibrate the global inventory cycle. In the short term, supply will be cleared once through the oil crisis; and subsequently, stronger stock replenishment demand may emerge. The global inventory cycle could therefore resonate, further driving a supply-demand reversal in the chemical industry.

The third main line is the repricing of chemical assets. After 2022, Europe, and after this oil crisis, Japan, South Korea, and Southeast Asia could all be constrained by their fragile supply chains, facing accelerated clearing of chemical supply. As a result, global effective chemical assets will highlight their scarcity. On the demand side, benefiting from the rapid rise of its population structure and resource prices, demand in Asia, Africa, and Latin America is growing quickly, which may bring about a supply-demand gap for industrial goods and thereby push industrial-goods inflation. Against this backdrop, the market will recognize the non-replicability of China’s chemical assets, and will apply a premium to China’s production capacity that has supply-chain resilience ensured.

Jin Yiteng also believes that this geostrategic conflict is likely to add additional momentum to China’s chemical sector’s rise, and the industry’s long-term logic for improved fundamentals will continue to be strengthened. Driven by the shock of this round of energy crises, global chemical companies’ operating rates have dropped significantly, but terminal rigid demand has not disappeared. The industry is currently experiencing a large-scale de-stocking cycle worldwide. After the geostrategic conflict eases, the global chemical industry will move into a deterministic cycle of replenishing stocks. Combined with the market’s expectation that terminal demand will recover, chemical product profitability is expected to improve. From a long-term perspective, crises accelerate the clearing of overseas capacity, and both China’s global share in chemical products and the industry’s profitability center are poised to rise. Between 2022 and 2025, Europe’s chemical industry cumulatively shut down 9% of its total production capacity. In the future, China’s chemical companies will further capture global market share by leveraging core advantages such as full-industry-chain supporting capabilities and cost control, continuing to enjoy high-profit growth dividends.

At the same time, the capacity deployment cycle in the chemical industry has basically ended. During the “14th Five-Year Plan and 15th Five-Year Plan” period, the push to peak carbon emissions will continue. Restriction measures for high-energy-consuming products may be introduced one after another, forming strong rigid constraints on future capacity expansion. At the same time, it will clearly steer toward deeper remediation of “involution-style” competition. The inflection point in chemical industry fundamentals is gradually becoming clear.

“Currently, crude oil volatility has already been showing a trend toward marginal decline. Even if there are still periods of high volatility afterward, the marginal effect of it on the sector’s impact will continue to weaken. After this round of adjustments, most chemical industry leaders have entered deep value territory. We expect the chemical industry’s fundamental upcycle to accelerate.” Jin Yiteng said.

Layout: Yang Yucheng

Proofreading: Peng Qihua