Huachuang Securities: The expansion of PX and benzene supply is slowing down, but geopolitical disturbances do not change the recovery logic.

Huachuang Securities has released a research report stating that the profitability of the PX and benzene industries is at the bottom recovery stage and has relatively high elasticity. The trading logic for PX has gradually shifted from cost-push to supply contraction, with price resilience stronger than raw materials; the external dependence on benzene continues to rise, with strong spot support, forming a structurally favorable pattern. If transportation and raw material supply improve, the low price differential is expected to recover. Integrated large-scale refining companies benefit from raw material security and cost synergy advantages, showing relatively stronger profitability resilience and recovery elasticity. The main viewpoints of Huachuang Securities are as follows: The capacity expansion cycle for PX and benzene is nearing its end, and industry profitability is at the bottom recovery stage. 1) According to data from Baichuan Yingfu, from 2020 to 2025, domestic PX capacity is expected to expand from 25.64 million tons to 44.22 million tons, with a CAGR of 11.5%; benzene capacity is projected to grow from 16.30 million tons to 27.22 million tons, with a CAGR of 10.8%. Large-scale production has led to widespread pressure on industry profitability, but as capacity expansion enters a plateau phase, the fundamentals of the industry have significantly improved, providing strong bottom support. 2) In terms of PX, the industry's operating rate is expected to continue rising from 65% in 2022 to 84% in 2025, with the release of existing capacity nearing its limit; the PXN price differential center is at a low level of $232/ton, and after a significant weakening in the price differential as it entered 2026, it has gradually recovered, with the PXN price differential at $257.22/ton as of August 7. 3) Regarding benzene, the industry's operating rate is expected to rise from 72% in 2022 to 82% in 2025; from the second half of 2024, processing profits are expected to be suppressed by weakening demand for oil adjustments, increased co-produced benzene, and import impacts, with current profitability at historically low levels, leaving limited further downside and a high repair elasticity. The new capacity release for PX is delayed, and the supply-demand pattern for benzene is tight. 1) In terms of PX: The capacity increase is limited from 2024 to 2025, with new capacity mainly coming online at the end of 2026. The substantive supply increase in the first half of the year is relatively limited. Combined with concentrated maintenance of facilities in the second quarter, short-term supply has contracted; the operating rate reached a historically high level in February 2026, with limited further load increase capacity; the industrys CR6 has reached 77%, indicating high concentration. 2) The trading logic for PX has gradually shifted from cost absorption to supply contraction, with price resilience stronger than raw materials. It is expected that the PXN price differential center will rise above $300/ton in 2026, showing significant profitability elasticity estimations indicate that for every rise of 1,000 yuan/ton in PX price, the after-tax profit elasticity corresponding to the market capitalization ratios for Rongsheng Petro Chemical and Jiangsu Eastern Shenghong is both 3.0%. 3) For benzene: From 2020 to 2025, the CAGR of apparent consumption is expected to reach 14%, with strong long-term growth momentum on the demand side; in 2025, imports are expected to increase sharply by 30% to 5.61 million tons, continuously raising external dependence with strong spot support, forming a structurally favorable pattern. 4) From 2026 to 2028, there are still new capacity plans on the supply side for benzene, with strong growth in downstream demand for styrene, caprolactam, etc. The industry's supply and demand will be jointly influenced by the rhythm of new units coming online, the operating rate, and changes in import volume. Middle East Geopolitical Conflicts: Short-term disruptions do not change fundamentals, with significant resilience from integrated leaders. 1) Since the disruption in the Strait of Hormuz on February 28, 2026, tight naphtha supply has led to short-term pressures on the PXN and BZN price differentials. However, the depth of this price squeeze has also built up space for subsequent recovery. 2) Private large refining companies represented by Rongsheng Petro Chemical, Hengli Petrochemical, and Jiangsu Eastern Shenghong benefit from their vertical integration advantage in crude oil-naphtha-PX-benzene, with significantly better cost resilience than non-integrated units; Northeast Asian refineries reducing output have further decreased exports of PX and benzene to China, strengthening domestic replacement supply. 3) Since June, the ceasefire and conflicts have fluctuated repeatedly. As of August 7, although parties have proposed ceasefire plans that include reopening the Strait of Hormuz, no formal agreement has been reached, and there remains significant uncertainty in the geopolitical situation. Short-term raw material, freight, and insurance costs may continue to disrupt PX and benzene profitability, but the medium-term framework has not shown significant changes, with supply expansion slowing and continued domestic import demand; if transportation and raw material supply improve, the low price differential is expected to recover, and integrated large refining enterprises, benefiting from raw material security and cost synergy advantages, will show relatively stronger profitability resilience and recovery elasticity. Recommended attention: Rongsheng Petro Chemical, Hengli Petrochemical, Jiangsu Eastern Shenghong, China Petroleum & Chemical Corporation, PetroChina. Risk reminders: 1. Risk of oil price fluctuations; 2. Risk of demand being lower than expected; 3. Export risks; 4. Risks of industrial policy adjustments.