Operating Rates for Chinese Chemical Products Broadly Decline, with TiO2 Posting the Largest Drop

Overview

This report is UBS's weekly tracking of China's oil & gas and chemicals sector, published on April 13, 2026, focusing on refinery operating rates, major chemical utilization rates, inventory changes and preferred stocks. The report concludes that utilization rates for Chinese chemical products broadly declined, with TiO2 seeing a particularly notable drop; state-owned refinery operating rates continued to trend lower, and average wholesale prices for gasoline and diesel fell against a backdrop of soft demand.

Core views

The core views are: first, state-owned refinery operating rates in refining continued to decline, mainly because some refineries were undergoing maintenance and some companies were cutting crude processing volumes; second, operating rates for most chemical categories fell WoW, with weakness in ethylene, PDH, PVC, PX/PTA and polyester filament, and TiO2 showing the most notable decline; third, inventories of PP, PE and polyester filament built up, indicating downstream demand remains soft; fourth, on stock selection, the report continues to favor upstream and chemical leaders with long-term oil price support and cost advantages, while also monitoring companies with improving profitability and new materials exposure.

Analysis framework

The report uses a weekly high-frequency tracking framework, combining refinery operating rates, chemical plant utilization, inventory changes and key stock preferences to assess industry conditions, and then maps those signals to preferred names based on cost advantages, oil price outlook, earnings recovery and valuation methods.

Methodology notes

• Industry high-frequency data trackingWeekly tracking of operating rates and inventories

  Utilization, inventory and price changes are used to judge short-term supply-demand conditions.

  The report tracks operating rates at state-owned and independent refineries, utilization rates for major chemical products, inventories at sample plants, and changes in gasoline and diesel prices to identify weak demand, supply contraction or inventory pressure.

• Valuation methodsDCF, P/BV-ROE, EV/EBITDA, SOTP

  Different companies are valued using different frameworks.

  UBS discloses DCF for Wanhua, Guanggang, NHU, Tinci, Sinocera and Baofeng, P/BV-ROE for Satellite Chemical, EV/EBITDA for CNOOC-A/H, and SOTP for PetroChina-A/H and Dongyue.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CNOOC

  Preferred name

  Strengths

  Benefits from the long-term oil price outlook and has resource exposure as an upstream oil & gas name.

  Weaknesses

  Sensitive to oil price volatility.

  Comparison

  Compared with downstream chemical products, it is less directly affected by weak chemical demand.

  Risks

  A decline or sharp fluctuation in crude prices, or reserves and production growth falling short of expectations.

• PetroChina-A/H

  Preferred name

  Strengths

  Upstream oil & gas exposure and integrated energy businesses allow it to benefit from a more constructive long-term oil price outlook.

  Weaknesses

  Still affected by oil price volatility, refining margins and prices of major petrochemical products.

  Comparison

  The report discloses SOTP valuation for PetroChina-A/H.

  Risks

  A decline in crude prices, lower prices for major petrochemical products, or weaker-than-expected operating improvement.

• Satellite Chemical

  Preferred name

  Strengths

  Has a cost advantage, and the report discloses a P/BV-ROE valuation framework.

  Weaknesses

  Earnings leverage may be pressured when chemical demand is weak.

  Comparison

  Its cost advantage is a relative highlight versus general chemical companies.

  Risks

  Earnings volatility due to changes in international oil prices, and fundamentals being weakened by larger-than-expected new capacity additions.

• Baofeng

  Preferred name

  Strengths

  Has a cost advantage and is included in the DCF valuation framework.

  Weaknesses

  Weak industry operating rates and demand may limit short-term earnings improvement.

  Comparison

  The report recommends it together with other cost-advantaged chemical names.

  Risks

  Chemical demand coming in below expectations and rapid industry capacity additions.

• Wanhua/Dongyue/NHU

  Profit-improving names

  Strengths

  The report believes related companies are seeing improving profitability.

  Weaknesses

  The chemical cycle and product prices remain key variables.

  Comparison

  Wanhua and NHU use DCF valuation, while Dongyue uses SOTP valuation.

  Risks

  Changes in international oil prices, weak chemical demand and pressure from new capacity.

• Sinocera/Tinci/Guanggang

  Preferred new materials names

  Strengths

  The report favors these names among new materials companies.

  Weaknesses

  Demand recovery and product prices still need to be monitored.

  Comparison

  The report mentions an earnings call for Shandong Sinocera on April 28, and Guanggang, Tinci and Sinocera use DCF valuation.

  Risks

  Downstream demand coming in below expectations and profitability improving less than expected.

Key data

• State-owned refinery average operating rate71.11%Down 1.47 percentage points WoW, with some refineries still under maintenance or cutting crude processing volumes.
• Independent refinery average operating rate53.57%Basically flat WoW.
• #92 gasoline wholesale price change-Rmb304/tDespite the retail price ceiling being raised on April 7, weak demand led to a decline in the domestic average wholesale price.
• #0 diesel wholesale price change-Rmb156/tDeclined due to weak demand.
• Naphtha-based ethylene operating rate74%Down 1 percentage point WoW, clearly below the 88% level seen in early March and about 9 percentage points lower YoY.
• MTO route operating rate91%Down 1 percentage point WoW.
• PE/PP operating rate75%/65%Basically stable last week, but 10/12 percentage points lower than the same period in 2025, respectively.
• PDH operating rate54%Down 2 percentage points WoW and 8-10 percentage points lower than the 2024-2025 period.
• PVC operating rate76%Down 2 percentage points WoW and also lower YoY.
• TDI/MDI operating rate85%/82%TDI rose 1 percentage point WoW, while MDI was stable WoW.
• TiO2 operating rate69%Down 5 percentage points WoW and 8-16 percentage points lower than the 2024-2025 period.
• PP/PE inventory564/583ktUp 25%/15% WoW, respectively, reflecting soft downstream demand.
• TiO2 inventory-16% WoWInventories fell WoW because some producers faced sulfuric acid shortages and cut production.
• Polyester filament inventory+6% WoWDownstream demand did not improve significantly.

Impact & implications

In the short term, lower operating rates and inventory buildup point to a weak recovery in chemical demand, and fundamentals for chemical products remain under pressure. The decline in TiO2 inventories is more attributable to production cuts and raw material shortages than to a meaningful demand improvement. From an investment perspective, the report leans toward upstream oil & gas, chemical companies with clear cost advantages, leaders with improving profitability, and selected new materials names, rather than a broad bullish view on the entire chemical chain.

Risks

• A decline or sharp fluctuation in crude prices.
• Reserves and production growth falling short of expectations.
• A decline in prices of major petrochemical products.
• Weak chemical demand due to macro uncertainty.
• New capacity coming online faster than expected, leading to a clear deterioration in chemical fundamentals.
• Sharp swings in chemical company earnings caused by changes in international oil prices.

What to watch

• Whether operating rates at state-owned and independent refineries stabilize.
• Subsequent changes in operating rates for ethylene, PDH, PVC, PX/PTA, polyester filament and TiO2.
• Whether inventories of PP, PE, PVC, TiO2 and polyester filament continue to build or begin to destock.
• Whether gasoline and diesel wholesale prices remain under pressure from weak demand.
• The continued impact of sulfuric acid shortages on TiO2 production and inventories.
• Hengli Petrochemical's April 22 earnings call and Shandong Sinocera's April 28 earnings call.