When BASF's second-quarter operating profit surged 137.1% year-on-year, the global chemical industry seemed to be collectively emerging from a downturn. But the recovery is uneven—Wanhua Chemical's net profit rose 64.35% in H1, while SABIC swung to a loss. For the textile and fiber chain, shifts in upstream chemical profit distribution often signal upcoming changes in fabric costs and supply patterns.
The Logic Behind Profit Recovery
From disclosed half-year reports, the chemical industry is indeed in a recovery window. BASF's Q2 sales reached EUR 17.206 billion, with strong operating profit growth not being an isolated case; INEOS, Covestro, and Wacker all returned to profitability, indicating European chemical leaders are easing cost pressures. The US market shows positive signs too: Dow turned profitable, and Westlake also recovered, while Ecolab and DuPont maintained steady growth.
But recovery is uneven. Evonik's profit slipped slightly, Lanxess widened losses, and Solvay saw declines in both revenue and profit; Celanese and IFF faced profit drops. This divergence means that improved chemical spreads are not universal but concentrated in specific product lines and regions. For upstream textile materials like PTA, MEG, and caprolactam, price trends will depend more on capacity adjustments by integrated players than on overall industry sentiment.
Asian Integration Dividends and Textile Feedstock Transmission
Asia was the highlight of this reporting season, especially Chinese refining-chemical integration leaders. Wanhua Chemical posted H1 revenue of RMB 119.316 billion and net profit of RMB 10.063 billion; Hengyi Petrochemical, Eastern Shenghong, and Rongsheng Petrochemical saw net profits multiply several-fold, underscoring the ongoing benefits of integrated refining-chemical operations. Taiwanese chemical firms collectively returned to profitability, while Japanese and Korean companies saw substantial profit gains, indicating Asia's growing influence in chemical supply.
This integrated layout has profound implications for the textile chain. Integrated players control the entire chain from crude oil to polyester and fabric feedstocks. Their profit expansion often means compressed intermediate costs, potentially leading to more competitive raw material prices downstream. But SABIC's loss is a reminder that not all integrated players benefit—raw material cost volatility and downstream demand strength remain critical variables.
For domestic textile enterprises, the upstream feedstock supply structure is shifting from fragmented sources to integrated dominance. This means procurement should focus more on integrated players' operating rates and inventory strategies rather than just spot prices. When refining leaders are highly profitable, their expansion willingness grows, potentially easing medium-term feedstock supply. Conversely, if profits narrow, output cuts risk price spikes, increasing fabric cost volatility.
Sub-sector Divergence and Textile Relevance
Among sub-sectors, industrial gases grew steadily, but Air Products reported a large loss; crop science was stable, fertilizers diverged, and coatings leaders saw steady gains. These divergences reflect downstream demand strength and raw material cost swings. For textiles, steady industrial gas and coatings performance indirectly signals manufacturing activity and consumer resilience, while fertilizer fluctuations relate to cotton planting costs.
More importantly, analysts note that integrated layouts and high-value specialty materials are key to navigating cycles. This applies equally to textile chemicals—enterprises with complete chains from raw materials to fabrics are more resilient than single-process players. The trend of fiber leaders extending into specialty and functional fabrics will accelerate, compressing profit margins for ordinary fabric processors.