On February 10, Premier Li Qiang presided over an executive meeting of the State Council to discuss policy measures to resolve structural contradictions in key industries. The meeting stressed the need to address structural problems from both the supply and demand sides to ensure healthy industrial development and upgrading. Key strategies include optimizing industrial layout, strengthening standard leadership, promoting integration and restructuring, promoting the withdrawal of backward and inefficient production capacity, and increasing the supply of high-end production capacity.

　　In recent years, the continuous investment in the chemical industry's production capacity has led to increased supply pressure. From 2021 to 2024, the compound growth rate of fixed-asset investment in chemical raw materials and products reached 15.9%, significantly higher than previous development stages. Although the investment growth rate slowed to 8.6% in 2024, it is still higher than the previous demand growth rate, resulting in continued increase in the current industry's supply pressure, and a significant adjustment in the Price of some bulk products.

　　This meeting once again emphasized resolving structural contradictions in the industry, promoting the withdrawal of backward and inefficient production capacity, which will help to clear up production capacity and optimize the industry structure. Since the second half of 2024, the Producer Price Index (PPI) of the chemical raw materials and products industry has remained below 100, and corporate profits have been squeezed. Following the release of the "2024-2025 Energy Conservation and Carbon Reduction Action Plan" in 2024, this meeting once again mentioned the elimination of backward production capacity, showing the policy's continued focus on the supply side.

　　Based on observations of previous chemical industry cycles, while demand is a stabilizing factor, the impact of the supply side is equally important. Currently, the industry's newly added production capacity is gradually Enter the later stages of investment, and some products have Enter the marginal cost resistance stage. If changes occur on the supply side, it is expected to accelerate the transformation of the industry's supply and demand structure and improve the profitability of products that have Enter the bottoming-out phase; under the background of energy consumption control, the improvement of profitability of high-energy-consuming products is more likely to be sustained in the long term.

　　Regarding investment recommendations, although the meeting did not directly specify specific industries, the general direction is worth noting. If policies are implemented later, they may lead to significant changes in cyclical sub-products. According to the meeting's discussions, optimizing industrial layout, strengthening standard leadership, promoting integration and restructuring, and withdrawing backward and inefficient production capacity will enable leading companies to improve profitability and increase market share.

　　Risk tips: It is necessary to pay attention to the risks of policy implementation, the risk of exceeding expectations in the industry's new production capacity, the risk of insufficient energy consumption monitoring, and the risk of prolonged withdrawal of backward production capacity. (Source: First Chemical Network)