China's chemical market cycle in 2026: recovery or rebound?

1. the essence of the current rally

from the end of 2025 to the beginning of 2026, China's chemical market ushered in a round of collective price repair market, individual varieties of a single month cumulative increase of more than 50%. The market is clearly divided on this: optimists believe that a new round of strong cycles has begun, while cautious ones characterize it as a technical rebound after an overshoot.

The basis for judgment is: the core driving force of the current price increase, is the price fell below the cost line after the passive clearance-production enterprises to reduce production limits, supply contraction to push prices to stop falling. This is repair of the rise with the real boom. Demand-driven rise there are essential differences. The typical characteristics of the boom period should be: prices break the cost line sharply, capacity utilization exceeds 85%, and corporate profits soars. The market does not yet have these conditions.

For overseas traders, this judgment directly affects the pace of stocking and contract strategy-the current price recovery is more of a valuation repair than a starting point for a trending market.

Multi-dimensional cross-validation of 2. period data

profit margin index: According to the theoretical profit margin statistics of 133 chemical varieties in the past 16 years (2009-2025), China's chemical industry has experienced two complete peak cycles:

• the first round: high 2010-2011, low 2014-2016, span about 6 years
• round 2: High 2020-2021, low around 2025, span about 5 years

if the large cycle maintains the traditional span of about 10 years, it may still be in the trough area around 2026, after which the upward phase may start. However, it is worth noting that the frequency of the two cycles has been significantly compressed from the traditional 10 years to 5-6 years, suggesting that the industrial structure has undergone deep changes.

Ethylene spread indicator: The historical spread between CFR Northeast Asia ethylene and Japanese naphtha shows that the full petrochemical cycle is 8-10 years and the small cycle is about 5 years. The spread lows for 2023-2025 are roughly in line with the margin indicator, with the possibility of a phase high in 2026, but the probability of a direct pull-up to boom highs is low. Historical experience shows that the start of a new cycle often requires years of adjustment and transition.

The common points of the two indicators:2026 is more likely to be a new upward cycle. Initial starting point instead of going straight into the boom. Judging from a cautious perspective, it may also be still in the end adjustment phase of the previous cycle.

Structural differentiation on the demand side of 3.

The consumer side has shown signs of recovery, but there is a clear structural differentiation rather than a full-scale recovery.

Supported areas:

• automobile industry chain: In 2025, car sales will increase by 9.4 year-on-year, and new energy vehicles will continue to grow, driving the expansion of demand for automotive plastics, rubber, coatings, battery materials, etc.
• Textile Clothing: Retail sales of textiles and clothing will increase by 4.69 in 2025, driven by the "trade-in" policy, benefiting chemical fiber, dyes, auxiliaries and other varieties.
• new energy industry chain photovoltaic, wind power, energy storage industry rapid expansion, EVA, POE, electrolyte, diaphragm and other new materials demand explosive growth.

Areas of sustained pressure:

• chemicals (architectural coatings, insulation materials, pipes, etc.) that are deeply bound to real estate are difficult to get out of recession in the short term.
• The lack of obvious demand for infrastructure-related chemicals is good.
• Blocked export markets further suppress the price elasticity of some basic chemicals.

This pattern of differentiation has direct reference value for overseas buyers: there is substantial demand support for specialty chemicals and functional materials linked to the new energy and automotive industry chain, while the sustainability of the price recovery of traditional bulk basic chemicals is relatively weak, and it is necessary to guard against the risk of falling again after a phased rebound.

4. conclusion and strategy suggestion

combining profit margins, ethylene spreads and consumer-side data, the following judgments can be made:

cycle positioning: the probability of 2026 is still in the transition phase from the bottom of the cycle to the early recovery, not the boom. The traditional large-cycle model of synchronous upward movement of the whole industry is weakening, and structural differentiation has become the new normal.

Strategic implications for overseas practitioners:

• should not be based on the current price rebound for aggressive long single lock price, should maintain contract flexibility
• focus on new energy, automotive industry chain related varieties of medium-and long-term allocation opportunities
• it is advisable to adopt the short-cycle stocking strategy of "buy as you use" for traditional bulk chemicals.
• Closely track China's capacity utilization and start-up data as a leading indicator to determine the position of the true cycle.

In the Chinese chemical market in 2026, opportunities and risks are highly coexisting. Understanding structural differentiation is more practical than betting on an overall cycle reversal.