Modified Plastic Sector Divergence Intensifies, Upstream Raw Materials Remain Under Pressure, Emerging Tracks Open Long-Term Space

On June 23, the modified plastic sector in the A-share market showed divergent trends. Jiasailong once rose by 2.03% during the session, closing slightly up by 0.06% at around 35.76 yuan, with a trading volume of 39.3473 million yuan and a turnover rate of 2.84%. Its total market value is 1.917 billion yuan, and there has been a net inflow of main funds for three consecutive days. In the company's revenue composition, modified PP accounts for 56.81%, modified ABS 11.16%, and modified PC/ABS 10.20%. On the other hand, Daon Co., Ltd. fell by 2.06%, closing at 33.29 yuan per share with a trading volume of 14.9062 million yuan and a total market value of 15.926 billion yuan. The modified plastic business accounts for 72.65% of the company's total revenue.

From the overall perspective of the sector, the new materials sector saw a rise this week, with the new materials index increasing by 9.61%. Among them, biodegradable plastics rose by 3.85%, electronic chemicals surged by 19.33%, and semiconductor materials increased by 16.37%. Although modified plastics, as an important sub-sector of basic chemicals, did not outperform the aforementioned popular tracks, the trend of continuous improvement in the industry fundamentals remains unchanged. By 2025, domestic modified plastic production is expected to reach 32 million tons, and consumption is projected to reach 34.5 million tons, with average annual compound growth rates of 10% and 8%, respectively.

1. Continued Pressure on the Raw Materials Side, with Cost Support Clearly Weakening

In stark contrast to the divergent of the modified plastics sector, the upstream raw material market is undergoing a sustained correction. On June 23, the main contracts of domestic commodity futures broadly closed in the red. Among them, crude oil fell by more than 3%, polypropylene dropped by more than 3%, plastics fell by nearly 2%, styrene fell by nearly 2%, and PVC fell by more than 2%. At the morning close, propylene fell by more than 2%, polypropylene dropped by nearly 2%, and plastics fell by more than 1%.

In international oil prices, the NYMEX crude oil futures July contract closed at $74.82/barrel, down $1.78/barrel, a month-on-month decline of 2.32%; the ICE Brent crude futures August contract closed at $77.90/barrel, down $2.67/barrel, a month-on-month decline of 3.31%. The continued weakness in crude oil prices is driven by changes in the geopolitical landscape. According to Iranian media reports on the 23rd, Mohammad Bagher Qalibaf, Speaker of Iran’s Islamic Consultative Assembly, said that the Strait of Hormuz would be managed by Iran in accordance with international law and its own arrangements, and that the Iranian side would establish a coordination center and hotline to address related issues. News that the United States has loosened restrictions on Iranian oil sales has further heightened market concerns over increased supply, significantly weakening cost-side support for polypropylene.

In the spot market, under the dual pressure of collapsing costs and weak demand, the prices of polyolefins continue to weaken. Downstream factories show limited enthusiasm for taking delivery, making it difficult for actual transactions to increase significantly.

II. Industry hot topics continue to emerge, while technological breakthroughs and the shift toward high-end development accelerate.

Beneath the apparent sector divergence, structural positives within the modified plastics industry continue to unfold.

Leading enterprises are constantly emerging with patent achievements.On June 23, information from the China National Intellectual Property Administration showed that Kingfa Sci. & Tech. Co., Ltd. had applied for a patent titled “A Polycarbonate Composition and Its Preparation Method and Application.” By leveraging the rigidity of glass fiber-reinforced materials and the synergistic effect of silicone copolycarbonate, EMA, and silicone toughening agents, the composition achieves high stiffness, high toughness, and high flexural durability at the same time, making it more suitable for applications in mobile phones and robotics. Kingfa Sci. & Tech.’s operating revenue reached RMB 65.396 billion in 2025, ranking first among 21 companies in the industry. Its core business segment of modified plastics accounted for 54.71% of total revenue, reaching RMB 35.781 billion.

On the same day, Wanhua Chemical obtained a patent related to an amide compound, which can be used as a plasticizer to enhance the heat resistance and mechanical properties of polymers. Yingtong New Materials obtained a patent for “A SEBS-Modified High-Resilience Hot-Melt Film and Its Preparation Method.” Silike Technology obtained a patent for “A Core-Shell Structured Styrene-Acrylic Resin-Modified Silicone Elastomer Toughening Agent and Its Preparation Method and Application.”

The industry conference focuses on emerging sectors.On June 22, the 2026 Conference on the Integrated Innovation and Development of Advanced Polymer Materials and New Energy was successfully held in Ningbo, with more than 300 representatives in attendance from leading enterprises such as Kingfa, Shanghai Kumho Sunny, Covestro, XPeng Motors, and Sinopec Zhenhai Refining & Chemical. The conference noted that, in the face of the “dual carbon” goals and the trend toward digital and intelligent transformation, the modified plastics industry is accelerating its upgrade toward high performance, sustainability, and digitalization. At present, emerging sectors such as new energy vehicles, the low-altitude economy, and humanoid robotics are driving continuously growing demand for lightweight, high-strength, weather-resistant, and high-performance modified polymer materials. Conference topics covered intelligent injection molding, AI applications in blend modification, lightweight material selection for humanoid robots, and innovation in specialty engineering plastics.

The implementation of the EU’s new ELV regulations is reshaping the rules of industry competition.The EU’s revised ELV regulation has been formally adopted, mandating that new vehicles contain 15% recycled plastic within six years and 25% within ten years, with closed-loop recycling required. The new rules explicitly require that at least 20% of recycled plastics come from end-of-life vehicles through closed-loop recycling. This means that traditional modified plastics manufacturers that cannot provide traceable proof of post-consumer waste sources risk being removed from the supply chain. Material suppliers with digital traceability capabilities will have a priority advantage in nomination opportunities. In China, companies such as GEM and Kingfa are accelerating automotive-grade validation by leveraging domestic recycling systems and cost advantages. Chinese suppliers now have only a 24-month window remaining to complete automotive-grade certification.

3. The demand for automotive lightweighting is driven by long-term growth logic that remains unchanged.

Despite short-term pressure on the raw material side and divergent performance across the sector, the long-term growth logic of the modified plastics industry remains solid.

Policy-driven clarity.In the updated version of the "Key New Materials Application Promotion Catalog" released by the Ministry of Industry and Information Technology in 2026, 12 new categories of modified plastic-related products have been added. Products included in the catalog can enjoy tax reductions, project subsidies, and other support policies. The "Encouraged Foreign Investment Catalog" has also included various new materials in its encouraged categories. Meanwhile, several national standards, such as "Plastic Carbon Nanotube Modified Polystyrene Materials" and "Environmental Requirements and Labeling for Modified Plastics," are being formulated.

Automotive lightweighting is the biggest driver of demand.Starting from January this year, the new national standard "Energy Consumption Limits for Electric Vehicles" has been implemented, and a hard threshold has been set for overweight models with the new vehicle purchase tax technical standards coming in 2026. As the route of simply "stacking batteries" for extended range is no longer viable, lightweight design has become the only way out for automakers. It is expected that by 2026, the use of modified plastics per vehicle will increase to 210 kilograms, and the total demand for modified plastics in the automotive industry will reach approximately 5.98 million tons. The market size for modified plastic components in domestic automobiles is expected to reach 223.3 billion yuan by 2027, with a compound annual growth rate of about 10% from 2025 to 2027.

The demand for modified PP in automotive applications is particularly prominent. The amount of PP used in traditional fuel passenger vehicles is about 30-40 kg per vehicle, while the PP usage in new energy pure electric passenger vehicles reaches 45-55 kg per vehicle. The demand for automotive PP has become the strongest growth point in the polypropylene market in recent years.

High-end development and domestic substitution offer broad potential.China is already the world's largest producer and consumer of synthetic resins, but there are still supply gaps in core products such as high-end engineering plastics and specialty modified materials. Looking ahead, as the technical standards for purchase tax tighten in 2026, competition for lightweight materials will become more intense. Domestic suppliers that can be the first to complete automotive-grade certification and achieve large-scale production and delivery will dominate in the new round of supply chain reshuffling.

IV. Short-Term Disturbances Do Not Alter the Long-Term Trend

Overall, the divergent performance of the modified plastics sector on June 23 reflects that the industry is currently in a transitional stage of “upstream pressure and downstream buildup.” In the short term, easing geopolitical tensions has continued to release pressure on the raw material side, while the sustained weakness in crude oil and polyolefin prices has weighed on the sector to some extent. However, from a medium- to long-term perspective, driven by policy support, technological breakthroughs, and expanding downstream demand, the industry’s shift toward higher-end and greener development is accelerating. The lightweighting of new energy vehicles, the substitution of recycled materials prompted by the EU ELV regulations, and the demand for high-performance materials from emerging sectors such as humanoid robots will open up broad growth opportunities for domestic suppliers with core technological barriers and compliance capabilities.

Editor: Winnie