On the eve of a new major chemical industry cycle!

At its core, the chemical business is about earning processing fees—converting crude oil into plastics, synthetic fibers, rubber, solvents, and so on. Historically, periods of moderate oil price increases have often delivered the industry’s richest profit margins—because downstream demand expands in tandem, product prices rise accordingly, and spreads (price differentials) widen. When oil prices retreat from highs and settle into a relatively stable range, this very adjustment frees up profit space for mid- and downstream players. That is precisely the situation today: Although crude oil prices have recently declined, the gross margins (spreads) of key domestic integrated refining-and-chemical projects have not shrunk—in fact, they have expanded by over 11% sequentially. Acrylonitrile spreads surged by RMB 1,600 per ton in just one week; MMA spreads rose by more than RMB 700 per ton. Underpinning this is proactive supply contraction: Short-term plant shutdowns and tight spot-market availability have kept prices resilient despite falling feedstock costs. Turning to broader industry pricing data: The PTA processing margin has recently climbed to RMB 466 per ton. Further downstream, spandex demand grew 16% year-on-year in the first half of the year, with its spread rising quarter-on-quarter. For refrigerant R32, the Q3 long-term contract price jumped from RMB 60,000 to RMB 65,000 per ton—and producers hold exceptionally strong pricing power. In the polyester value chain, the most-discussed product—polyester filament—shows notably lean inventories: fabric and finished textile stocks sit 20–30 days below year-ago levels. Even during the traditional off-season, inventory buildup has been insufficient—meaning substantial upside elasticity awaits once peak-season demand kicks in. Chemical product profitability is poised for re-acceleration. The second genuine pillar supporting this macro-cycle thesis is a truly historic, globally synchronized capacity purge—and the survivors standing at the table post-purge will be overwhelmingly Chinese. First, consider overseas developments. From 2022 through 2025, Europe will have permanently shuttered 37 million tons of chemical capacity—9% of its regional total—six times faster than historical norms. Steam cracker units—the upstream “cash printers” of the chemical industry—have seen 16% of their capacity permanently eliminated. Europe’s total chemical-sector capital expenditure will plummet to just €1.5 billion in 2025—a staggering 81% drop from 2022 levels. Dow has closed three core facilities in Germany and the UK; Shell has permanently shut two large steam crackers in the Netherlands and the UK; TotalEnergies plans to permanently close its Belgian cracker by 2027; and SABIC has outright sold its entire European petrochemical business. These are not cyclical maintenance cuts—they are permanent closures. Equipment is dismantled. It will never restart. Japan and Korea are likewise retrenching. Korea’s YNCC permanently shut down two steam crackers in Yeosu, slashing ethylene output by 60%; Lotte’s DaeSan cracker is scheduled for a three-year suspension—impacting 1.1 million tons of ethylene capacity. Japan’s three largest chemical firms—Mitsui Chemicals, Asahi Kasei, and Mitsubishi Chemical—are consolidating their western-Japan ethylene assets, deliberately downsizing under high-cost pressure. Even ExxonMobil permanently closed its decades-old steam cracker in Singapore this past June. A common driver underlies all these shutdowns: Ethylene production costs in Europe hover around USD 885 per ton; in Japan and Korea, they run USD 800–850 per ton—while U.S. and Middle Eastern ethane-based crackers operate at just USD 200–350 per ton. China’s new generation of integrated refining-and-chemical complexes also boast cost structures markedly lower than those in Europe or Japan/Korea. High oil prices during the U.S.–Iran conflict served as the final straw—but now that oil prices have receded…

ICIS Global Top 100 Chemical Companies: Who’s truly strong—and who’s merely bloated? What will define competitive advantage in the chemical industry’s future?

These two companies operate fundamentally different businesses—differing in asset intensity, cyclical exposure, customer relationships, and pricing power. Sales revenue alone indicates which company is larger—not which is stronger. IV. The global chemical industry isn’t uniformly deteriorating; it’s rapidly fragmenting. Of the 100 companies on the ICIS list, 91 disclosed EBIT data: 53 posted operating profit margins below 5%, and 26 reported operating losses. Twenty firms maintained double-digit EBIT margins. Amid industry-wide sluggishness, severe divergence is unfolding. Covestro posted a USD 407 million loss; Westlake Chemical lost USD 1.426 billion; Celanese lost USD 786 million; Versalis reported an operating loss of USD 1.672 billion; FMC lost USD 1.647 billion. Meanwhile, Shin-Etsu, NewMarket, and Givaudan continue delivering robust profit conversion. If all firms were weakening simultaneously, it might simply reflect a cyclical downturn. But when some suffer massive losses while others sustain operating margins above 20%—even within the same cycle—factors like product mix, cost positioning, customer switching costs, technological barriers, and capital intensity become critically decisive. The cycle hasn’t vanished—it has magnified previously subtle differences among business models. V. What matters most isn’t chasing ‘high-end’ products—but optimizing product portfolio quality. Commodity chemicals face persistent margin pressure, while specialty chemicals show visible profitability—so it’s tempting to label ‘high-end’ as the universal solution. Yet oversimplifying this as “commodities = bad, specialties = good” is commercially inaccurate. A commodity chemical firm backed by low-cost feedstocks, highly efficient assets, and a world-leading cost curve can generate outstanding returns on capital. Conversely, a so-called specialty chemical enterprise—whose products lack meaningful barriers to entry, whose customers face negligible switching costs, and whose markets attract numerous new entrants—may earn little or no profit. Thus, what truly matters isn’t merely whether products are commodity or specialty—but the quality of the overall product portfolio. Can a chemical company’s portfolio weather cycles? How much pricing power does it command? How much capital does it tie up? How durable are its technological moats? What’s the remaining growth runway in its target markets? Do customers face real costs in switching suppliers? Only by integrating all these dimensions can we assess whether a firm converts sales into profits—and profits into sustainable, long-term returns. From this perspective, what truly merits emulation in Wanhua isn’t merely its polyurethane business—but its ability to integrate polyurethanes, petrochemicals, advanced materials, and battery materials into a more stable, higher-return business system than any single product line could deliver alone. Capital allocation capability is the ultimate pursuit for large-scale chemical enterprises—though its results only become evident years later. VI. The global chemical industry is shifting—from capacity expansion capability to capital allocation capability. Among the 76 ICIS-listed companies disclosing year-on-year capex changes, 44 cut capital expenditures, 31 increased them, and one held steady. Even industry giants are trimming capex: nearly 60% of firms reduced spending. In 2025, BASF’s capex fell 31.2% to USD 5.007 billion; Dow’s dropped 15.7%; SABIC’s declined 30.7%; and ExxonMobil’s chemical capex fell 8.4%.