Zhang Xixi, the Chief Analyst at TF Securities, delivers her report of Long-term trend of refining and chemical industry and its impact on aromatics and olefins industry.

Ms. Zhang's report is divided into the following four parts:

First, Crude Oil: Stable at Mid-to-High Levels. Ms. Zhang explains that the traditional capacity cycle, influenced by economic conditions and investment willingness, depends on the construction cycle of production capacity. However, in recent years, this logic chain has been disrupted by ESG factors. The elasticity of shale oil supply has decreased, and the production levels of sanctioned countries (Russia and Iran) remain high, with OPEC demonstrating strong control and demands.

Second, Continued Reinforcement of Weak Oil Trends. Ms. Zhang notes that global refinery investments are slowing down due to expectations of energy transition, while the peak duration of petrochemical product capacity release is surpassing initial forecasts.

Third, Aromatics: Reflects long-term refinery profits, not polyester industry chains. Ms. Zhang notes a shortage of finished oil products, causing mixed aromatics and PX to align with gasoline operations, rather than reflecting "PX-naphtha" profits. Profits from PX dominate the polyester industry, with leading plants focusing on refining capacity expansion. This hints at potential improvements in domestic polyester supply and demand.

Fourth, Olefins: Weak Competitive Position in the Naphtha Route, Losing Market Share. Ms. Zhang emphasizes the sustained advantage of the ethane cracking route, fueled by profits from coal-to-olefins projects, supported by domestic pricing mechanisms. Coal-to-olefins projects are proliferating across the country. While dividends have significantly improved within the industry and individual companies, there is a downward trend in the dividend yield demanded by investors at the macroeconomic level.