1-minute limit-up! The entire chemical sector is going crazy! Saudi Arabia suddenly announces big news

It’s the Chemicals sector’s turn today!

Early on April 7, the Chemicals sector surged across the board! As of the time of publication by a reporter from China Securities Journal, the Wind Chemicals Industry Index jumped more than 3%, leading all A-shares. Among them, Dongyue Silicium Materials hit the daily limit 1 minute after the open; then Lingwei Technology also closed up 20% at the daily limit. Xinan Shares, Youfu Shares, Hengyi Petrochemical, and several other stocks also closed at the daily limit, with 13 stocks gaining more than 10%.

On the news front, according to Xinhua News Agency reports, in the early hours of April 7, Iran’s Fars News Agency cited unnamed sources as saying that an explosion occurred that day in the Jubail industrial zone in northeastern Saudi Arabia, involving U.S. capital, and that it was the result of a large-scale attack. The Israel Defense Forces said in a statement on April 6 that on that day it carried out an airstrike on a large petrochemical integrated facility in Iran’s southern Asaluyeh area. The facility is Iran’s largest petrochemical complex.

Institutional analysis believes that over the past 10 years, the global chemicals industry has not achieved any major improvement in large-scale capacity; instead, supply has been clearing. After 2022, Europe—and also Japan, South Korea, and Southeast Asia after this oil crisis—may all be constrained by their fragile supply chains, facing accelerated supply clearing in chemicals. Global effective chemical assets will therefore highlight their scarcity. On the demand side, benefiting from rapid growth in population structure and resource prices, demand in Asia, Africa, and Latin America is growing quickly. This may create a supply-demand gap in industrial goods and thereby drive industrial-goods inflation. Against this backdrop, the market will recognize that China’s chemical assets are not replicable, and will assign a premium to China’s production capacity that can ensure supply-chain resilience.

Chemicals sector surges across the board

Early on April 7, the Chemicals sector drove a broad rally in A-shares!

As of the time of publication by a reporter from China Securities Journal, the Wind Chemicals Industry Index rose more than 3%. Lingwei Technology hit the daily limit with a gain of 20%; Dongyue Silicium Materials also hit the daily limit. Guangkang Biochemical rose more than 13%, and stocks such as Jiangnan Textile and others also hit the daily limit. For heavyweight stocks, Wanhua Chemical rose 4.39%, Baofeng Energy rose more than 6%, and Hailu Hengsheng rose more than 7%.

The conflict in the Middle East has become the biggest trigger for the market. According to Xinhua News Agency reports, in the early hours of April 7, Iran’s Fars News Agency cited unnamed sources as saying that an explosion occurred that day in the Jubail industrial zone in northeastern Saudi Arabia, involving U.S. capital, as the result of a large-scale attack.

It was reported that the Jubail industrial zone is one of the world’s important petrochemical production bases. Its annual output is about 60 million metric tons of petrochemical products, accounting for 6% to 8% of the world’s total output. Several large petrochemical enterprises and projects are clustered within the zone. Among them, Saudi Basic Industries Corporation is one of the key investors in the industrial zone. In addition, the Sadara project involving Dow Chemical, as well as projects jointly invested by Saudi Aramco and TotalEnergies, are also located in the industrial zone.

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

The statement said that the Israeli forces have struck two major petrochemical integrated complexes in Iran, dealing a severe blow to more than 85% of Iran’s petrochemical product export capacity.

The statement said that facilities related to Asaluyeh include critical infrastructure for producing materials such as explosives and ballistic missile propulsion agents, serving as an important raw-material supply hub for Iran’s missile industry. The Israeli forces will continue to increase strikes on Iran’s core weapon-production infrastructure, aiming to cause “widespread and sustained damage” to its military manufacturing capability.

A securities analyst told a China Securities Journal reporter that the impact of the war between the U.S. and Iran on the petrochemical industry is no longer limited to oil prices. The short-term supply shock caused by attacks on industrial parks is even more direct, and the market will provide even more direct feedback. In the medium- to long-term, petrochemical production capacity in both the Middle East and Europe may continue to contract due to the war.

Jin Yeteng, chief analyst for chemicals at Kaiyuan Securities, also said in a recent research report that, from a long-term perspective, the crisis accelerates the clearing of overseas capacity, and that China’s global share of chemicals and its earnings center will rise together. Between 2013 and now, China’s chemical products sales revenue and capital expenditures for the chemical industry have remained No. 1 globally and have shown stable growth. From 2022 to 2025, Europe’s chemical industry cumulatively shut down 9% of its total production capacity. In the future, Chinese chemical companies will further capture global market share and continue to enjoy high-earnings dividends, leveraging core advantages such as full-industry-chain supporting arrangements and cost control.

The sector enters an upward cycle

It is worth noting that institutional optimism about chemicals has been sustained for some time.

Yang Hui, assistant to the head of the Research Institute at CITIC Construction Investment Securities and chief analyst for Petroleum & Petrochemicals and Basic Chemicals, said that the first mainline for chemicals’ core development in 2026 is an upward shift in the oil-price core. Based on the fact that crude oil has moved away from the marginal pricing paradigm based on supply and demand and entered the OPEC-led resource nationalism pricing paradigm, the judgment that the oil-price core will move upward supports being bullish on oil-and-gas stocks, coal-chemical industry, and natural-gas chemical industries.

The second mainline is a reversal in supply and demand. After the chemicals industry went through capacity digestion over the past 3 years, it entered last year a phase in which fixed-asset capital expenditure turned negative. With demand steadily rising due to overseas support, the market is likely to see a supply-and-demand reversal for the chemicals industry this year. The war between the U.S. and Iran is expected to re-calibrate the global inventory cycle. In the short term, the oil crisis may achieve a one-time supply clearing, and afterward, stronger restocking demand may follow. As a result, the global inventory cycle may resonate and thereby drive a supply-and-demand reversal in the chemicals industry.

The third mainline is the re-pricing of chemical assets. After 2022, Europe—and also, after this oil crisis, Japan, South Korea, and Southeast Asia—may all be trapped by their fragile supply chains, facing accelerated supply clearing in chemicals. Global effective chemical assets will therefore highlight their scarcity. On the demand side, benefiting from rapid growth in population structure and resource prices, demand in Asia, Africa, and Latin America is growing quickly. This may create a supply-demand gap in industrial products and thereby drive industrial-goods inflation. Against this backdrop, the market will recognize the non-replicability of China’s chemical assets, and will assign a premium to China’s production capacity that ensures supply-chain resilience.

Jin Yeteng believes that this round of geopolitical conflict is expected to add further momentum to China’s chemicals industry boom, and that the long-term logic behind industry prosperity will be strengthened. Due to the shock from the current energy crisis, global chemicals companies’ operating rates have fallen sharply, but terminal rigid demand has not disappeared. The industry is currently going through a large-scale global destocking cycle. After the geopolitical conflict eases, the global chemicals industry will enter a phase of certain restocking, and with the market’s expectation of a rebound in terminal demand, profitability for chemicals is expected to improve. From a long-term perspective, the crisis accelerates the clearing of overseas capacity, and China’s global share of chemicals and its earnings center will rise together. From 2022 to 2025, Europe’s chemical industry cumulatively shut down 9% of its total production capacity. In the future, Chinese chemical companies will further seize global market share and continue to enjoy high-earnings dividends, leveraging core advantages such as full-industry-chain supporting arrangements and cost control.

At the same time, the capacity investment and deployment cycle in the chemicals industry has basically come to an end. During the “15th Five-Year Plan” period, steps to push carbon peaking will continue to advance, and restrictions on high-energy-consumption products may be rolled out one after another, forming a strong and rigid constraint on future capacity expansion. At the same time, the direction for intensifying remediation of “involution-style” competition has also been made clear. The turning point in chemicals prosperity is gradually becoming clearer.

“Current crude-oil volatility has already shown a marginal downward trend. Even if there is still stage-by-stage high volatility afterward, the marginal effect of that volatility on the sector’s impact will continue to weaken. After this round of adjustment, most chemicals-industry leaders have already entered deep-value territory. We expect the chemicals industry’s prosperity cycle may accelerate and arrive sooner,” Jin Yeteng said.

(Source: China Securities Journal)