Products Surge 70%! Chemical Industry Chain Commodities See Price Hike Wave, Which Way Will the Market Go?

After a brief correction, on March 12th, the domestic futures market for chemical commodities saw a collective rebound. During trading, the main contracts saw crude oil rise over 18%, PTA up more than 13%, and xylene, propylene, and other products each increased by over 10%.

Recently, amid escalating geopolitical conflicts in the Middle East and a sharp rise in international crude oil prices, domestic energy chemical prices have surged strongly, with some products increasing by as much as 70%.

Behind the overall bottoming and reversal trend of chemical commodity prices, the profitability of the upstream and downstream industries is currently showing divergence.

According to interviews, driven by high crude oil prices, upstream raw material producers of energy chemicals have seen significant profit improvements, while midstream polyolefin industries are suffering losses due to rising raw material costs. Downstream product companies are also facing cost transmission pressures.

Analysts generally believe that in the short term, the energy chemical market will remain volatile and strong, but the trends of different varieties may diverge, and market uncertainty remains high.

Energy chemical price increases lead to profit divergence

Since the end of February, the chemical market has shown a broad upward trend, with many products reaching new highs for the period.

“Within just a few days, the price of dichloromethane has jumped from about 1,630 yuan/ton to around 2,800 yuan/ton, an increase of about 70%,” said Xu Yanbin, an analyst at Zhuochuang Information. He also noted that current enterprise inventories are almost zero, and prices are expected to approach the 3,000 yuan/ton mark soon, with market bullish sentiment high.

As an upstream of dichloromethane, the methanol market is also performing strongly.

Data from Zhuochuang Information shows that as of March 6, CFR China methanol was priced at $296.5/ton, up 11.89% from February 28; CFR Southeast Asia was at $405/ton, up $90/ton from the end of February, a 28.57% increase. Fan Tinglu, an analyst at Business Society, stated that recently, methanol prices in East China (Taicang port) have increased by 26.74%, with the rise shifting from emotional factors to actual supply-side losses.

In the midstream of the energy chemical industry chain, polyolefin products are also showing upward momentum. According to Longzhong Information, as of March 9, the nationwide average price of polypropylene filament was 9,718 yuan/ton, a sharp increase of 3,123 yuan/ton from the end of February, a 17.35% rise. On March 9 alone, polyethylene market prices increased by over 2,000 yuan/ton, with LDPE seeing a maximum daily increase of over 3,000 yuan/ton.

Downstream urea prices have also strengthened recently amid overall volatility in energy chemicals. Data from Zhuochuang shows that on March 9, the average price of urea in China was 1,875 yuan/ton, up 2.54% from February 27.

Compared to the rapid price increases, the profitability across the industry chain is showing significant divergence.

Production companies of dichloromethane and methanol are the main beneficiaries of this round of price rises. Xu Yanbin explained that previously, dichloromethane prices were at historic lows, around 1,600 yuan/ton, with widespread losses. Now, most companies have turned profitable, with clear intentions to continue rising prices, and a strong reluctance to sell at low prices.

However, the polyolefin industry is caught in an awkward situation where “flour is more expensive than bread.”

Wang Xiu, a polypropylene analyst at Longzhong, calculated that with an international crude oil price of about $108 per barrel, the cost of oil-based polypropylene is approximately 10,269 yuan/ton. Currently, spot prices are only around 9,600 yuan/ton, resulting in a loss of about 669 yuan per ton. Chao Lin, an analyst at Longzhong for polyethylene, also noted that although prices of various polyethylene grades have recently risen, only LDPE has covered the cost increase, LLDPE remains near cost levels, and HDPE losses are widening, sharply compressing profit margins for producers.

The cost transmission pressure on downstream product companies is even more evident. Chao Lin cited a plastic packaging company executive who said, “Our new orders use high-priced inventory raw materials, so we are just ‘toughing it out.’ Over time, we may have to halt production or raise prices for customers.” Wang Xiu also mentioned that with plastic raw material prices rising by 2,000 yuan/ton, plastic product prices need to follow suit. However, since the actual price increases of plastic products are still smaller than raw material costs, profit margins are under pressure, and most product companies are currently halting orders or negotiating on a case-by-case basis.

Ceng Xiaoyong, assistant general manager of Huawen Futures Co., Ltd., told reporters that in response to the short-term surge in energy chemical raw material prices, downstream companies are actively using futures and options to hedge risks, with some forced to reduce production or halt operations.

“Because the conflict in the Middle East has some unexpected developments, some companies lack contingency measures. However, leading companies had stockpiled before the Spring Festival and adopted routine hedging strategies, with most hedging covering one to two months of raw material needs,” he said.

Geopolitical conflicts and maintenance expectations resonate

The recent surge in energy chemical prices is the result of multiple factors, including escalating Middle East conflicts, soaring international energy prices, and domestic spring maintenance expectations.

The closure of the Strait of Hormuz, a critical global energy transit route, has directly impacted the Asian methanol market.

“Currently, many methanol projects in the Middle East have halted operations, and due to geopolitical tensions, shipping is largely suspended. Under the volatile situation, the actual methanol imports in March are uncertain, and the reduction in supply is the main reason for the recent price increase,” Fan Tinglu explained.

The turmoil in the Middle East has also severely disrupted the global urea supply chain. Wu Yuanli, a urea analyst at Zhuochuang, said Iran is one of the top three urea exporters globally, with annual exports of about 5 to 6 million tons, and the Middle East’s total urea exports are around 20 million tons, accounting for 35% of global maritime trade. During this conflict, one of the world’s largest nitrogen fertilizer plants, Qatar Energy, was forced to halt production after an attack on facilities and natural gas supply disruptions, with an annual urea capacity of 5.8 million tons.

International transportation costs have also surged amid geopolitical turmoil, further pushing up commodity prices.

Wang Xiu told reporters that if oil tankers are forced to reroute around the Cape of Good Hope, voyage times and costs will increase significantly, and war risk insurance premiums will soar. These additional costs will ultimately be reflected in the landed price of crude oil, with war premiums adding to the cost, making it impossible for companies to avoid risk, and rapidly shrinking processing margins.

“Due to the international situation, the import market is currently cautious. Even if some offers appear, importers are reluctant to pay deposits, given the current uncertainties and shipping schedule risks,” Chao Lin added.

Beyond international market impacts, domestic spring maintenance expectations are also fueling the current energy chemical price rally.

“Recently, news that major dichloromethane producers plan to conduct mid-March maintenance has been a significant factor driving prices higher,” Xu Yanbin said. Although no substantial production cuts have yet occurred, the market has begun trading on ‘maintenance expectations,’ and downstream companies are actively replenishing inventories.

Regarding the actual impact of spring maintenance, Chao Lin said that this year’s chlor-alkali plant maintenance is smaller than in previous years, with operating rates maintained at around 86.4%. As for methanol, the scale of spring maintenance has been decreasing year by year, and its impact on supply is gradually weakening. Despite recent disruptions in Middle Eastern methanol transportation and soaring prices, the previous heavy losses of MTO plants mean that methanol producers remain cautious about resuming production.

Market volatility and risk warning

Looking ahead, most analysts believe that the energy chemical market will likely remain volatile and strong in the short term, but divergence among different varieties is inevitable.

“Currently, producer inventories are almost zero, and market sentiment is bullish,” Xu Yanbin said. Although the price increase of dichloromethane may stabilize later, it once reached over 8,000 yuan/ton, and there is still room for further gains. However, cost uncertainties remain critical. The trend of raw material methanol closely links to geopolitical developments, and producers find it difficult to absorb rising costs alone, making ex-factory prices prone to upward movement.

However, Xu also noted that if the Strait remains closed and Middle Eastern supplies are interrupted, the coastal methanol market may stay between 2,400 and 3,000 yuan/ton in the near to medium term. Conversely, if tensions ease and navigation resumes, prices could face correction as market fundamentals reassert themselves.

Compared to other varieties, the polypropylene industry’s upward price potential is relatively weaker. Wang Xiu pointed out that current PP prices are mainly supported by crude oil supply shortages caused by geopolitical issues. High raw material costs make downstream companies struggle, and short-term cost pass-through is limited, risking a price correction.

Xiao Kun, an analyst at Business Society, emphasized that the development of the Strait of Hormuz situation and Middle East conflicts will directly determine the supply gap of crude oil and related products, which is the core factor supporting the market. Downstream acceptance of raw material price increases and the recovery of terminal demand will influence the sustainability of energy chemical price rises. If terminal demand cannot keep pace with rising costs, a correction may occur. Overall, the short-term volatility risk in commodity markets has increased significantly, and caution is advised against profit-taking after rapid gains.

Cheng Xiaoyong also believes that most chemical prices may see a phased rebound in the first half of 2026. However, given the widespread overcapacity and ongoing new capacity projects, the rebound will be limited. He noted that whether the domestic “anti-involution” policies will be further refined and implemented is worth watching. The 2026 government work report plans to upgrade the governance of “involution” from last year’s comprehensive rectification to deeper regulation, including capacity control, standards, price enforcement, and quality supervision. “If these measures are further detailed and implemented, the chemical market could shift from destocking to capacity reduction, potentially reversing the bear market and initiating a sustained upward trend,” he concluded.