Chemical Sector Surges, Phosphorus Chemicals Emerge: Strategic Value Revaluation and Investment Opportunity Analysis
Introduction
On June 22, 2025, the chemical sector showed a notable volatile surge. Chemical ETF Huawei (516020), tracking the sector's overall trend, opened low but quickly turned positive, rising 0.56% as of press time. Behind this market performance, leading stocks in sub-sectors such as phosphorus chemicals, titanium dioxide, and petrochemicals strengthened, with Xingfa Group and Chuanfa Longma both hitting limit-up, Longbai Group and Zhejiang Longsheng rising over 6%, and stocks like Tongkun Co., Ltd., Tongcheng New Materials, and Dongcai Technology also performing impressively. Is this wave driven by short-term sentiment or a signal of fundamental turnaround? This article deeply analyzes the strategic value revaluation logic of the chemical sector, especially phosphorus chemicals, and medium-to-long-term investment opportunities.
1. Chemical Sector Moves: Structural Rally or Trend Turning Point?
(1) Sector Performance Overview
The June 22 chemical rally is not an isolated event. Structurally, leading phosphorus chemicals, titanium dioxide, and petrochemical sectors show a distinct “resources + cycle” feature. Xingfa Group and Chuanfa Longma both hit limit-up, indicating capital re-pricing phosphorus resources' strategic value; titanium dioxide leader Longbai Group rose 8.46%, Zhejiang Longsheng over 10%, driven by improved supply-demand expectations and higher cash dividend capacity.
In petrochemicals, Tongkun Co., Ltd. surged 7.38%, with Tongcheng New Materials and Dongcai Technology also performing well. From a chain perspective, the petrochemical strength is closely linked to global energy price volatility, downstream demand recovery expectations, and industry supply contraction. Common features: prominent resource endowments, high technical barriers, broad downstream applications, combining cyclical flexibility and growth attributes.
(2) Driving Factors
Drivers of this chemical rally can be summarized at three levels:
1. Macro economy and improved supply-demand balance. Dongxing Securities analysis indicates chemical supply-side capacity expansion is near end, with fixed-asset investment growth turning negative. This means marginal new capacity is decreasing, shifting balance from oversupply to equilibrium or even shortage. Meanwhile, demand shows recovery, inventories are low, and industry recovery conditions are maturing.
2. Cost support and price revaluation. Cost support is particularly evident in phosphorus chemicals. Since 2025, upstream phosphate rock prices have remained high, and sulfur (sulfuric acid) prices rose significantly. This cost transmission drives phosphorus chemical product price revaluation. Globally, the US has weak domestic phosphorus capacity and is highly import-dependent; global phosphorus resource shifts are driving supply contraction and price revaluation.
3. Policy catalysts and upgraded strategic resource status. In November 2025, phosphate was officially included in the US Critical Minerals list. This policy change elevates phosphorus's strategic value in US policy systems. Combined with earlier phosphorus chemical policy implementations, the strategic position of integrated “mining, beneficiation, processing” leading enterprises is further highlighted.
2. Phosphorus Chemicals: From Cyclical Commodity to Strategic Resource Revaluation
(1) Chain Deep Dive
The phosphorus chemical chain consists of upstream phosphate mining, midstream yellow phosphorus and phosphoric acid production, and downstream phosphate fertilizers, glyphosate, and lithium iron phosphate applications. Traditionally, phosphorus chemicals are classified as cyclical, with price fluctuations mainly affected by agricultural demand and macro cycles. However, with the explosive growth of new energy demand for lithium iron phosphate batteries in recent years, the “resource attribute” and “strategic attribute” of phosphorus chemicals are being redefined.
(2) Global Competition: New Strategic Landscape of Phosphorus Resources
Kaiyuan Securities research reveals an important trend: the US has weak domestic phosphorus capacity and is highly import-dependent. This structural flaw became more prominent after the US Critical Minerals list revision. Including phosphate in the list means the US government will elevate phosphorus security to a national security strategy level. This will not only drive US phosphorus resource exploration but may also alter global phosphorus resource trade patterns.
From the supply side, global phosphate rock distribution is highly uneven: Morocco, China, and the US are major reserve countries, but high-grade resources are increasingly scarce. Although China is a major phosphorus resource country, after decades of mining, high-grade ore reserves are declining, and under the “dual carbon” policy constraints, phosphorus chemical companies have limited capacity expansion space. This supply contraction expectation is pushing up the price center of phosphorus resources.
(3) Domestic Advantageous Enterprises: Dual Drive of Resources and Technology
In the reshaping of the phosphorus chemical industry landscape, enterprises with integrated “mining, beneficiation, processing” capabilities have significant advantages. Leading companies like Xingfa Group and Chuanfa Longma demonstrate core competitiveness in:
Resource advantages: owning high-quality phosphorus mines, high ore self-sufficiency, strong cost control. Technology advantages: mature technologies in ore beneficiation, yellow phosphorus production, and fine phosphorus chemicals, enabling full-chain value extraction from ore to high value-added products. Cash flow and dividend capacity: steady operating performance, ample operating cash flow, increasing cash dividend incentives. This is particularly important under the current A-share market's “high dividend, high payout” investment logic.
3. Other Chemical Sector Highlights: Titanium Dioxide, Petrochemicals, and Emerging Tracks
(1) Titanium Dioxide: Supply-Demand Improvement and Structural Opportunities
Longbai Group and Zhejiang Longsheng's performance in titanium dioxide reflects improved supply-demand expectations for this segment. Titanium dioxide, an important white pigment, is widely used in coatings, plastics, paper, etc. In recent years, driven by stricter environmental policies and capacity elimination, supply side has been contracting; simultaneously, downstream sectors like real estate completion and automotive painting are gradually recovering, creating a supply-demand gap.
Notably, titanium dioxide companies are accelerating “integration + high-end” transformation, with some extending their chains to utilize by-products, further enhancing profitability.
(2) Petrochemicals: Cycle Bottom and Leading Enterprise Value
The rise of petrochemical leaders like Tongkun Co., Ltd. reflects market expectations of a cyclical bottom reversal. The petrochemical industry is heavy asset and strongly cyclical. Currently, fixed-asset investment growth in petrochemicals is negative, meaning future new capacity will be significantly reduced. With moderate demand recovery, the industry supply-demand balance is expected to shift from “loose” to “tight”, with leaders benefiting first from profit recovery.
(3) AI Computing, Robotics, New Energy, and Other Emerging Tracks
The CSI Chemical Industry Sub-Index tracked by Chemical ETF Huawei includes stocks not limited to traditional chemicals but extends to hot themes like AI computing, robotics, and new energy. This means the investment logic of the chemical sector is shifting from “cycle speculation” to “industry upgrade and growth drive”. For example, electronic chemicals, specialty gases, and high-performance composite materials have strong domestic substitution demand, injecting growth attributes into the chemical sector.
4. Investment Strategy and Risk Warning
(1) Chemical ETF: Efficient Tool for Chemical Sector Allocation
For ordinary investors, investing through Chemical ETF Huawei (516020) is more efficient and risk-diversified. This ETF tracks the CSI Chemical Industry Sub-Index, covering core segments like phosphorus chemicals, titanium dioxide, petrochemicals, and new energy materials, while also including emerging themes like AI computing and robotics, providing a “one-basket” allocation tool for quality chemical assets.
For investors preferring off-site fund regular investments, the Chemical ETF Linking Fund (Class A 012537, Class C 012538) is a good choice. Class C has no subscription fee and no redemption fee after holding for over 7 days, suitable for short-term trading; Class A suits medium-to-long-term holding strategies.
(2) Risk Warning
It is crucial to note that investing in the chemical sector carries risks. Specifically:
Industry cycle risk: The chemical industry has strong cyclical features; macro fluctuations, raw material price volatility, and downstream demand changes can significantly impact profitability. Historical data shows the sector often exhibits “short bull, long bear” characteristics; investors should avoid chasing highs.
Policy and geopolitical risk: The enhanced strategic resource status of phosphorus chemicals brings opportunities but also uncertainties. Rising resource protectionism worldwide, trade policy changes, and geopolitical conflicts may impact the phosphorus chemical chain.
Company-level risk: Individual stock investment risk is more concentrated. Stock performance of leaders like Longbai Group and Xingfa Group may be affected by company-specific conditions, technological changes, management changes, etc. Investors should not equate individual stock performance with the overall sector.
Fund investment risk: Chemical ETF Huawei is rated R3-medium risk, suitable for balanced and above investors. Before subscribing, investors should carefully read the fund contract, prospectus, and other legal documents to fully understand the fund's risk-return characteristics. Particularly, stocks mentioned are only objective display of index constituents, not investment advice. The manager does not guarantee these stocks will continue to be included or reflect index performance.
(3) Investor Suitability Matching Suggestions
According to the fund manager's assessment, Chemical ETF Huawei's risk level is R3-medium risk, suitable for balanced (C3) and above investors. Different sales institutions may have different suitability matching opinions based on their own risk evaluation systems. Investors should refer to the final suitability opinion from the sales institution. The risk-return characteristics in the fund contract and the fund risk level may differ due to different consideration factors. Investors should carefully choose based on their own investment objectives, time horizon, experience, and risk tolerance.
Conclusion
The chemical sector's volatile surge on June 22, 2026, is not simply short-term sentiment but a concentrated reflection of multiple medium-to-long-term bullish factors. The strategic value revaluation of phosphorus chemicals stems from profound changes in global phosphorus resource patterns, structural pull from new energy demand, and ongoing domestic supply-side reform; the strength of titanium dioxide and petrochemical segments reflects positive signals of supply-demand improvement and capacity contraction expectations.
Looking ahead, with chemical supply-side capacity expansion nearing completion, fixed-asset investment growth continuously negative, and overall demand recovering, the chemical industry is expected to enter a structural recovery cycle. The dual drive of strategic resources and new energy is reshaping phosphorus chemical demand structure and accelerating transformation of old and new growth drivers. For investors, allocating through tools like Chemical ETF to capture sector opportunities on a risk-diversified basis is a rational and feasible strategy in the current market environment. However, the high volatility of cyclical industries requires investors to maintain sufficient patience and risk awareness, fully assess their own risk tolerance and investment horizon before making decisions, and avoid deviating from long-term investment plans due to short-term fluctuations.
