The global chemical industry is standing at the cusp of a new cycle, with a confluence of key indicators and market dynamics signaling an imminent turnaround. After a period of adjustment, the sector has entered a "sweet spot"—positioned to benefit from two transformative trends: the global anti-internal competition supply cycle and the booming global AI demand super cycle. This blog delves into the core insights from the 2026 Chemical Industry Strategy Report, unpacking the data that’s shaping industry outlook and investment opportunities.
Cycle Judgment: A New Chemical Industry Uptrend Is on the Horizon
To gauge industry momentum, we’ve developed the Guohai Chemical Industry Sentiment Index, which tracks the prices of 205 chemical products. A look back at recent cycles reveals a clear pattern: driven by demand pull and supply-side reforms, the chemical industry embarked on an upward trajectory in 2016, before entering a downturn in H2 2018. Then, starting in H2 2020, global monetary easing spurred a recovery in end-market demand, pushing chemical product prices higher.
A critical historical correlation stands out: the Basic Chemicals Stock Index leads the Guohai Chemical Industry Sentiment Index. In every previous downturn, once the Sentiment Index fell below 100, the Basic Chemicals Stock Index hit bottom and staged a rebound. The current cycle follows this script: the Sentiment Index dropped below 100 in September 2024, and the Basic Chemicals Stock Index has since initiated its bottoming recovery—strong evidence that a new cycle is poised to begin.
Key Macro & Industry Indicators: Signals of Improvement
China’s PPI Turns Positive Month-on-Month, Boosting Macro Prospects
A pivotal macroeconomic signal emerged in October 2025: China’s Producer Price Index (PPI) turned positive month-on-month for the first time this year, rising by 0.10%. While the year-on-year decline of 2.10% persisted, it narrowed by 0.20 percentage points from the previous month. This positive month-on-month uptick indicates a improving macroeconomic outlook. As PPI continues to recover, industrial product prices are expected to climb from their lows—directly benefiting the chemical sector, which is highly sensitive to price trends.
Basic Chemicals ROE Oscillates at the Bottom, Showing Stable Profitability
Q3 2025 data for the basic chemical industry reflects a sector stabilizing at the bottom of the cycle. The Return on Equity (ROE) stood at 1.80%, down 0.1 percentage points quarter-on-quarter but up 0.3 percentage points year-on-year. Net profit margin reached 6.22%, a 0.2 percentage point quarter-on-quarter decrease but a 1.1 percentage point year-on-year increase. Importantly, the industry’s leverage has continued to decline: the asset-liability ratio at the end of Q3 2025 was 47.89%, down 0.4 percentage points both year-on-year and quarter-on-quarter. While the asset turnover rate slipped slightly (15.08%, down 0.3 percentage points quarter-on-quarter and 0.5 percentage points year-on-year), the overall picture points to stable profitability and a healthier balance sheet—laying the groundwork for a recovery.
European Chemical Capacity Utilization Hits Historical Lows Amid High Energy Costs
Europe’s chemical industry continues to grapple with headwinds, primarily driven by soaring energy costs. In 2024, European natural gas prices averaged 36 EUR/MWh—double the 2014-2019 average of 18 EUR/MWh. This energy pressure has pushed capacity utilization to historical lows. According to Cefic (the European Chemical Industry Council), Europe’s chemical capacity utilization rate was 75.6% in Q2 2025 and fell further to 74.6% in Q3 2025—significantly below the historical average of 81.3%.
There is a glimmer of hope, however: demand constraints have eased slightly. Cefic reports that the proportion of chemical managers citing insufficient demand as a production limiting factor dropped from 41.5% in Q1 2024 to 38.2% in Q2 2024. Despite this improvement, overall European chemical production remains subdued, creating both challenges and opportunities for global competitors.
Global Chemical Production Rises Moderately, Led by China
Global chemical production showed resilience in H1 2024, increasing by over 6% year-on-year—with China as the primary growth engine. China’s chemical production surged by more than 10% year-on-year during this period, underpinned by its dominant position in the global market. Data from Cefic and United Credit Ratings reveals that China accounted for approximately 43% of global chemical sales in 2023—up roughly 12 percentage points from 2012. This growing market share underscores China’s pivotal role in shaping global chemical supply and demand dynamics.
2026 Outlook: Two Super Cycles Driving Growth
Looking ahead to 2026, the chemical industry’s growth trajectory will be defined by two powerful forces: the global anti-internal competition supply cycle and the global AI demand super cycle.
On the supply side, the "anti-internal competition" trend is reshaping the industry landscape. After years of profit pressure, many chemical sub-sectors are embracing self-discipline measures—such as capacity adjustments and production cuts—to avoid vicious price wars and rebalance supply and demand. This supply-side optimization is expected to stabilize product prices and improve profitability across the sector.
On the demand side, the AI boom is emerging as a game-changer. The global AI infrastructure investment wave—with annual capital expenditures by AI enterprises already soaring to $600 billion and projected to reach $3-4 trillion annually by 2030—is driving unprecedented demand for specialized chemicals. From materials for AI data centers (such as SOFC for on-site power generation) to high-performance PCB materials for AI servers, the AI super cycle is creating new growth vectors for the chemical industry.
Conclusion: Seizing Opportunities in the Sweet Spot
The 2026 chemical industry outlook is increasingly optimistic. Key indicators—from the bottoming of sentiment and stock indices to improving PPI and stable profitability—confirm that the sector is entering a new cycle. Meanwhile, the dual tailwinds of the global anti-internal competition supply cycle and AI demand super cycle are set to propel growth.
For investors and industry players, 2026 presents a strategic window to capitalize on these trends. Whether it’s leveraging China’s market leadership, navigating Europe’s energy-driven restructuring, or tapping into AI-related chemical demand, the key to success lies in recognizing the industry’s evolving dynamics and aligning strategies with the super cycles shaping its future.
