Policy weathervane: price law revision how to reconstruct the competitive landscape of the chemical industry.

on July 24, 2025, the National Development and Reform Commission issued a draft amendment to the Price Law (draft for comments), marking a major shift in the pricing mechanism of the Chinese market. In the 10 articles of the draft amendment, the word "cost" appears seven times, covering core provisions such as dumping below cost, substantial price increases above cost, and pricing at average social cost, completely changing the market pricing logic dominated by supply and demand in the past.

This change has profound implications for the chemical industry. The traditional supply and demand-driven pricing model will be replaced by a new mechanism dominated by cost factors, and the price fluctuations of basic raw materials such as crude oil, coal and natural gas will be directly rigidly transmitted to the end products, and the market will lose the elastic space to adjust supply and demand independently through price.

price System Remodeling and Regional Pattern Change

the cost pricing mechanism will redefine the chemical price system. Market prices are limited to fluctuate within a reasonable range on a cost basis, and excessive price deviations are at risk of illegality. This will lead to a significant reduction in inter-regional spreads, a reduction in cross-regional liquidity of products, and a compression of the traditional geographic arbitrage space.

For different product types, the impact shows structural differentiation: high-end new material products may continue to rise in price due to high technical costs, but demand growth may lag behind cost increases, resulting in a decline in operating rates; general chemicals such as polypropylene, PVC, etc. Due to overcapacity and cost transparency, prices will be compressed to near the cost line, and profit margins will be extremely narrowed.

Deep Adjustment of Enterprise Competition Pattern

cost transparency will accelerate the industry reshuffle. With the advantages of integration, circular economy model and technology accumulation, the head enterprises have significantly better cost control ability than small and medium-sized enterprises, and will obtain excess profits and further concentrate their market share under the new pricing mechanism.

The difference of production process will become the watershed of life and death. In the pure alkali industry, for example, the ammonia alkali method is more expensive than the natural alkali method and faces the risk of elimination under the cost pricing model. At the same time, research and development investment in low-margin products such as traditional plastics, coatings and plasticizers may decline, and the driving force for technological innovation will weaken.

international competitive strategy transformation

the international competition strategy of Chinese chemical enterprises will shift from "seizing the market at low price" to "cost transparent competition". Cost-sensitive products such as fertilizers and basic plastics may lose their international competitive advantage, while high-tech products such as lithium battery materials, semiconductor packaging materials and photovoltaic materials will continue to develop overseas markets by virtue of their technological advantages.

high-end technology premium highlights

in high-end fields such as electronic chemicals, lithium battery materials and semiconductor packaging adhesives, technical barriers provide enterprises with cost control advantages and pricing voice. The head company can maintain a high level of profitability under the cost pricing framework through patented technology and process optimization. Photovoltaic sealing film, power battery electrolyte and other rapid growth in demand for sub-areas, prices and costs of synchronous upward trend is obvious.

Basic chemicals profit margins narrowed

the underlying chemicals with overcapacity face a double squeeze: transparency in the cost structure limits the room for price increases, while weak demand on the consumer side inhibits volume growth. The profit margins of bulk products such as ethylene glycol and styrene will be further compressed, and the overall profitability of the industry will decline.

Small and medium-sized enterprises living space narrowed

small and medium-sized enterprises with insufficient investment in environmental protection and lack of technology research and development will face severe challenges. Under the cost pricing mechanism, these enterprises cannot enjoy the advantage of scale, the market price is locked near the level of leading enterprises, and the risk of profit loss increases significantly.

china's chemical industry market will undergo a structural reconstruction of "high-end leadership, green drive and regional coordination. The cost pricing mechanism will promote the transformation of the industry to high-quality development through the triple role of market clearance and elimination, technology iteration and upgrading, and policy adaptation and supervision.

Accelerated formation of oligarchic pattern

the field of basic chemicals will maintain thin profits, resource-rich areas will attract more investment, and the advantages of leading enterprises will be further expanded. In the field of high-performance fine chemicals, technology leaders will gain more premium space and market concentration will continue to increase.

Innovation drive becomes the core

technological innovation will become the core competitiveness of enterprises in the era of cost pricing. Process innovation and management optimization have become the main ways to reduce costs and increase efficiency, and the importance of R & D investment is further highlighted.

Global Positioning Upgrade

china's chemical industry is expected to upgrade from a "global manufacturing base" to a "global technology source", achieving a leap in the three dimensions of quality, efficiency and sustainability, providing historic development opportunities for enterprises with technological advantages.

For practitioners in the chemical industry, grasping the trend of policy changes and laying out technological innovation and cost control in advance will be the key to remain invincible under the new pricing mechanism.