China Credit Rating: Due to overcapacity and geopolitical influences, the outlook for Taiwan’s chemicals industry continues to be under pressure

Affected by China's long-term overcapacity, geopolitical uncertainty and trade barriers, the profitability and credit prospects of Taiwan's bulk chemicals industry continue to face downward pressure. The latest credit focus report released by China Credit Rating points out that although there will be a partial recovery in the industry in the first half of 2026, the overall performance may continue to be lower than the level in the middle of the business cycle. The rating outlook of many rated chemical companies has been negative or has been placed on negative credit watch.

Lai Guantian, a senior analyst at China Credit Ratings, said that the instability in the Strait of Hormuz is the biggest uncertainty in global trade and energy prices in 2026. Coupled with the fact that the average ethylene capacity utilization rate in the Asia-Pacific region has experienced a long downward cycle, it may further decline in 2026.

The report analyzed that as the chemical supply chain fluctuates violently, pushing up prices, and as the low-cost inventory obtained by enterprises in the early stage is gradually exhausted, it is expected that the profit margins of enterprises will be squeezed in the second half of 2026. In addition, the continued construction of trade barriers in major markets has also disrupted the export activities and profit recovery of bulk chemical companies.

According to statistics from China Credit Ratings, the current "negative" rating outlook is mainly concentrated in high-prosperity cyclical industries such as bulk chemicals and metals. The four major companies including Formosa Plastics Corporation (Formosa Plastics, Formosa Chemicals, Formosa Chemicals, and Nanya) all have negative rating outlooks; Taiwan Polymer Chemicals and Asia Polymers are also included in "Credit Watch Negative".

China Credit Rating pointed out that product differentiation and cost advantages will determine the recovery speed of various chemical companies. For example, bulk general chemicals companies such as Taipei Polymer are facing the heaviest competition and price pressure due to the high proportion of aromatic compounds and ethylene with overcapacity in their product portfolios.

In the diversified and specialty chemicals segment, Changchun Group has been able to maintain better profit performance due to its high contribution from the specialty chemicals business; Formosa Plastics Group can gradually support the recovery of its profitability through the business diversification of oil refining, electronic materials and specialty chemicals. Although Chimei Industrial has a high degree of product concentration, its net cash position and positive cash flow generation ability can provide some buffer space for its credit rating.